Distributions and Unemployment Payments

[Gilmore]

Does anyone have a good reference they would not mind sharing that shows for which state's taking a plan distribution may affect the individual's unemployment benefits?

Thanks.

[Larry Starr]

4 hours ago, Gilmore said:

Does anyone have a good reference they would not mind sharing that shows for which state's taking a plan distribution may affect the individual's unemployment benefits?

Thanks.

Are you saying that you know of some states where this is already the case?  That is surprising; there shouldn't be a connection except for those plans that actually replace income with a monthly check (called a defined benefit plan with participant in pay status!).  

[Peter Gulia]

If you’re crowd-sourcing a survey, here’s some background information about how a pension might affect Pennsylvania’s unemployment benefits.  (I have never worked with, and did not check, any of this information.)

 

Here’s the agency’s unofficial explanations:

 

“Pensions: Pension payments may be deductible from UC if (1) your [a] Base-Year [or chargeable] employer has contributed to or maintained the pension plan, and (2) your work during the Base Year increased the amount of, or affected your eligibility for, the pension.  (See your Notice of Financial Determination and accompanying insert entitled ‘Explanation of Your Notice of Financial Determination’ for complete information about your Base Year.)  If your employer was the only one who contributed to the pension, 100% of the prorated, weekly pension amount is deductible.  If you contributed in any amount to the pension, 50% of the prorated, weekly pension amount is deductible.  Pensions are deductible from weekly benefits on a dollar-for-dollar basis.  The following payments are NOT deductible, however:

• . . . .

• A lump-sum pension payment, if you did not have the option of receiving monthly or periodic payments.

• A lump-sum pension payment that is deposited (rolled over) into an eligible retirement plan, such as an IRA, within 60 days after you received the payment.  In other words, you can avoid having your UC benefits reduced if you roll over your pension to save it for retirement.  If you roll over only a part of a lump-sum payment, that portion of the lump-sum that is not rolled over is deductible.

• https://www.uc.pa.gov/unemployment-benefits/handbook/Pages/How-Weekly-Benefits-May-be-Reduced.aspx

•  

  “Pensions and retirement payments are deducted from UC if a base-year employer maintained or contributed to the pension plan and base-year employment affected the claimant's eligibility for, or increased the amount of, the pension.  Fifty percent of the pro-rated, weekly pension amount is deducted if the claimant contributed in any amount to the pension plan.  If the pension is entirely employer funded, 100 percent of the pro-rated, weekly pension amount is deducted from UC.

   

  Social Security and Railroad Retirement pensions are not deducted from UC benefit payments.

   

  A lump-sum pension payment is not deducted from UC, unless the claimant had the option of taking a monthly pension.  In addition, a lump-sum pension is not deductible if the claimant ‘rolls over’ the lump-sum into an eligible retirement plan such as an Individual Retirement Account (IRA) within 60 days of receipt.”

   

  https://www.uc.pa.gov/unemployment-benefits/Am-I-Eligible/benefit-eligibility/Pages/Miscellaneous.aspx

   

  Here’s the statute:

•  

   

  Pennsylvania Unemployment Compensation Law § 404 [unofficially compiled at 43 Pa. Stat. Ann. § 804]:

  https://govt.westlaw.com/pac/Document/N5CD19402BE8711E6996BCDAA9D9C062F?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default)

   

  And the regulations:

   

  34 Pa. Code § 65.101 to -.108

  https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/034/chapter65/s65.101.html&d=reduce

   

  34 Pa. Code § 65.102(k)(3):

  “If a claimant does not roll over the entire lump sum into an eligible retirement plan, as set forth in paragraph (1), the Department will determine the amount to be deducted from the claimant’s weekly benefit amount by dividing the amount of the lump sum payment that is received by the claimant by the total amount the claimant could have received had the claimant opted to take the entire lump sum available to the claimant.  That quotient represents the deductible share of the lump sum pension amount received by the claimant.  The claimant’s unreduced monthly pension is the amount the claimant could have received each month had the claimant opted to take periodic payments in lieu of a lump sum.  The Department will calculate the deductible portion of that unreduced monthly amount by multiplying it by the quotient representing the deductible share of the lump sum which is received by the claimant.  Using the deductible amount of that monthly pension, the Department will compute the prorated weekly deductible amount in accordance with § 65.108.”

   

  34 Pa. Code § 65.105:

  “Lump-sum retirement payments.

  (a)  When a claimant receives a lump-sum payment in lieu of a periodic pension payment, the prorated weekly pension amount which the employe could have received will be deducted in accordance with § 65.108 (relating to rules of attribution).

•  

   

  (b) When a claimant cannot receive periodic pension payments and must take a mandatory lump-sum payment, no pension deduction will be made.

   

  (c) When a claimant receives a deductible lump sum payment and transfers only a portion of that payment into an eligible retirement plan within 60 days of receipt, the remainder of the lump sum payment which is not transferred into an eligible retirement plan will be deducted, along with any other deductible pension payments made to the claimant under § 65.102 (relating to application of the deduction) and § 65.108.

   

  34 Pa. Code § 65.108:

  “Rules of attribution.

  If a pension, retirement, annuity or other similar periodic payment deductible under section 404(d)(2) of the law (43 P.S. § 804(d)(2)) is received on other than a weekly basis, the amount to be deducted will be prorated as follows:  The claimant’s monthly pension is the amount the claimant could have received each month had the claimant opted to take periodic payments in lieu of a lump sum.  The Department will use the deductible amount of that monthly pension, convert it to a yearly amount, and divide by 52.  If not a multiple of one dollar, the Department will determine the prorated weekly deductible amount of the pension by rounding to the next higher multiple of one dollar.  The weekly benefit amount payable to the claimant will be reduced, but not below zero, by the prorated weekly deductible amount of the pension, in accordance with section 404(d)(2) of the law.

[Gilmore]

Thanks Larry and Peter.  I think the unemployment issue was brought up briefly in a seminar last week, and we saw an article that mentioned that NJ had some rules about unemployment being affected by 401(k) distributions, but nothing as specific as Peter's info.  Thanks to you both.

[Peter Gulia]

It's a bit startling that a plan's sponsor might advantage a Pennsylvania unemployed person by not providing a payout option beyond a single sum.

[Profound2]

5.13.20 - Georgia provides that `if a UI claimant is receiving a monthly pension from an employer whose wages were used to establish the claim or the last employer from which you were separated, your benefit payment may be reduced. You must report all retirement income.'  p.38, Georgia Unemployment Insurance Claimants Handbook.  Presumably that would include any required minimum distribution if UI (UC) claimant is required to receive RMD's (temporarily suspended due to COVID19 ?)  Some who are required to receive RMD's are still working at least part-time and/or seasonally and as such, get laid off.

[Larry Starr]

31 minutes ago, Profound2 said:

5.13.20 - Georgia provides that `if a UI claimant is receiving a monthly pension from an employer whose wages were used to establish the claim or the last employer from which you were separated, your benefit payment may be reduced. You must report all retirement income.'  p.38, Georgia Unemployment Insurance Claimants Handbook.  Presumably that would include any required minimum distribution if UI (UC) claimant is required to receive RMD's (temporarily suspended due to COVID19 ?)  Some who are required to receive RMD's are still working at least part-time and/or seasonally and as such, get laid off.

I doubt that an RMD (single payment) can be classified as a monthly pension; therefore, it would not reduce the benefit in Georgia.  How do you read this otherwise? 

I'm not sure what your last sentence is intended to add; working part time don't appear to fit the statement of "and as such, get laid off". But I don't think it matters what that last sentence means since the issue is the effect of payments from the plan on unemployment benefits, not the effect of WORKING on unemployment benefits. FWIW.