STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

MICHAEL J ABLER, Employee

BRUNSWICK CORP, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 08004903FL


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed by the department.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employee worked for about twenty-two years as a trim operator for the employer, a boat engine manufacturer. On June 20, 2008 (week 25), the employer discharged the employee. At the time of his discharge, the employee was 51 years of age and not eligible for retirement payments under his pension plan until age 60. However, he was eligible for a termination withdrawal from his 401(k) plan, to which both he and the employer made contributions.

On July 7, 2008 (week 28), the employee received a lump sum distribution based on the value of his account as of that date, in the amount of $20,245.01, which after federal tax withheld and payment of an outstanding loan balance resulted in a net distribution amount of $15,386.58.

The initial issue to be decided is whether the employee was receiving a pension payment that should be treated as deductible income for any week claimed.

Wisconsin Stat. § 108.05(7) provides:

(7) Pension payments. 108.05(7)(a) Definitions. In this subsection:

1. "Pension payment" means a pension, retirement, annuity, or other similar payment made to a claimant, based on the previous work of that claimant, whether or not payable on a periodic basis, from a governmental or other retirement system maintained or contributed to by an employer from which that claimant has base period wages, other than a payment received under the federal Social Security Act (42 USC 301 et seq.) that is based in whole or in part upon taxes paid by the claimant.

2. "Rollover" means the transfer of all or part of a pension payment from one retirement plan or account to another retirement plan or account, whether the transfer occurs directly between plan or account trustees, or from the trustee of a plan or account to an individual payee and from that payee to the trustee of another plan or account, regardless of whether the plans or accounts are considered qualified trusts under 26 USC 401.

(b) Pension payment information. Any claimant who receives, is entitled to receive or has applied for a pension payment, and any employer by which the claimant was employed in his or her base period, shall furnish the department with such information relating to the payment as the department may request. Upon request of the department, the governmental or other retirement system responsible for making the payment shall report the information concerning the claimant's eligibility for and receipt of payments under that system to the department.

(c) Required benefit reduction. Except as provided in par. (cm), if a claimant actually or constructively receives a pension payment, the department shall reduce benefits otherwise payable to the claimant for a week of partial or total unemployment, but not below zero, if pars. (d) and (e) or if pars. (d) and (f) apply.

(cm) Payments received under Social Security Act. If a claimant receives a pension payment under the federal Social Security Act (42 USC 301 et seq.), the department shall not reduce the benefits otherwise payable to the claimant because the claimant contributed to a portion of the pension payment received by the claimant.

(d) Allocation. 1. If a pension payment is not paid on a weekly basis, the department shall allocate and attribute the payment to specific weeks if:

a. The payment is actually or constructively received on a periodic basis; or

b. The payment is actually or constructively received on other than a periodic basis and it has become definitely allocated and payable to the claimant by the close of each such week, and the department has provided due notice to the claimant that the payment will be allocated in accordance with subd. 2. b.

2. The department shall allocate a pension payment as follows:

a. If the payment is actually or constructively received on a periodic basis, the amount allocated to each week is the fraction of the payment attributable to that week.

b. If the payment is actually or constructively received on other than a periodic basis, the department shall make the allocation at not less than the claimant's most recent full weekly wage rate, unless the department determines that another basis for the allocation is more reasonable under the circumstances.

(e) Total employer funding. If no portion of a pension payment actually or constructively received by a claimant under this subsection is funded by the claimant's contributions, the department shall reduce the weekly benefits payable for a week of partial or total unemployment by an amount equal to the weekly pension amount if:

1. The claimant has base period wages from the employer from which the pension payment is received; and

2. The claimant has performed work for that employer since the start of the claimant's base period and that work or remuneration for that work affirmatively affected the claimant's eligibility for or increased the amount of the pension payment.

(f) Partial or total employee funding. If any portion of a pension payment actually or constructively received by a claimant under this subsection is funded by the claimant's contributions, the department shall compute the benefits payable for a week of partial or total unemployment as follows:

1. If the pension payment is received under the railroad retirement act (45 USC 231 et seq.), the department shall reduce the weekly benefits payable for a week of partial or total unemployment by 50% of the weekly pension amount.

2. If the pension payment is received under another retirement system, the claimant has base period wages from the employer from which the pension payment is received, the claimant has performed work for that employer since the start of the claimant's base period, and that work or remuneration for that work affirmatively affected the claimant's eligibility for or increased the amount of the pension payment, the department shall reduce the weekly benefits payable for a week of partial or total unemployment by 50% of the weekly pension amount, or by the percentage of the employer's contribution if acceptable evidence of a contribution by the employer other than 50% is furnished to the department.

(g) Constructive receipt. A claimant constructively receives a pension payment under this subsection only for weeks occurring after:

1. An application for a pension payment has been filed by or on behalf of the claimant; and

2. The claimant has been afforded due notice from his or her retirement system of his or her entitlement to a pension payment and the amount of the pension payment to which he or she is entitled.

As the department notes, the department cannot consider the employee's eligibility for retirement when determining whether payment constitutes a pension. The pension reduction prevents a situation where the claimant is receiving duplicate payments for not working with the same employer financing both payments. Deducting pension payments is a conformity requirement of the Federal Unemployment Tax Act.

Prior to 2003 the department did not treat a 401(k) payment as a pension payment.(1) In Unemployment Insurance Directive (UID) 03-16 the department stated:

Effective immediately, when the Department is notified that a claimant is receiving a 401(k) payment, an investigation must be conducted to determine whether it is a pension payment. Refer to "Action Required" for detailed instructions regarding implementation, retroactive decisions, etc.

In UID 06-26 the department stated in relevant part:

Effective immediately all 401(K) payments are to be treated as pensions unless an investigation indicates otherwise. It is no longer necessary to question the parties on the specifics of the plan unless one of the parties objects to the payment being treated as a pension. If so, the previous criteria is to be used.

The elements to be considered are set forth in UID 03-16 and, with more explanation, in the department's disputed claims manual as follows:

The commission agrees with the department that the 401(K) payment in this case is a "pension payment." The plan itself states that it is covered by ERISA. The employee cannot withdraw "at will." The employee can withdraw money to rollover, at 591/2 or due to hardship. The employee can only withdraw his pre-tax and rollover contributions. The employee cannot withdraw the company's contributions until he has terminated from the plan. A worker could be in the 401(k) and the employer's pension plan. The plan states that it is designed "primarily to supplement your retirement and Social Security benefits." Applying the department's criteria, the 401(K) payment constitutes a pension payment.

The claimant received notice of the pension payment on July 7, 2008 (week 28). The payment was received on other than a periodic basis. The department provided notice to the claimant via the determination issued on July 18, 2008 (week 29), that the payment would be allocated pursuant to Wis. Stat. § 108.05(7).(2) Pursuant to Wis. Stat. § 108.05(7)(d)1.b. the pension payment was received in week 29 of 2008.

The commission therefore finds that as of week 29 of 2008, the employee was actually or constructively receiving a pension payment and, as a result, benefits otherwise payable for a completed week of partial or total unemployment are subject to a reduction, within the meaning of Wis. Stat. § 108.05(7).

DECISION

The decision of the administrative law judge is reversed. Accordingly, beginning in week 29 of 2008, unemployment benefits must be reduced based on the employee's receipt of a pension payment. This matter is remanded to the department for further investigation to determine the relative contributions of the parties and appropriate weekly reduction.

Dated and mailed February 13, 2009
ablermi . urr : 132 : 1 : UW 980

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

cc: Mercury (Fond du Lac, Wisconsin)
Attorney Daniel J. La Rocque


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uploaded 2009/02/16


Footnotes:

(1)( Back ) Thus, at the time of the commission's decision in In Re: Anne T. Kreinus, UI Dec. Hearing No. 98003134MW (LIRC Feb. 9, 1999), cited by the ALJ, a payment from a 401(k) was not considered a pension payment.

(2)( Back ) There was no testimony that the claimant received the UCB-10 Claimant Handbook or was given verbal notice of the allocation by a department representative.