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

STEVEN R OSTROWSKY, Employee

SERVICE ELECTRIC INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing Nos. 09006497MD & 09006498MD


An administrative law judge 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 administrative law judge. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employee is a member of the International Brotherhood of Electrical Workers, Local 159. The employee has a retirement account administered by the union, which is funded by contributions from various employers for whom he has worked over the past ten years. The employee has not contributed any of his wages to the retirement account.

The employee's base period consists of quarters 1 through 4 of 2007. The employee worked for the named employer from January 9, 2007 through June 13, 2008 and earned $31.61 per hour. During that time the employer made a monthly contribution to the employee's retirement account.

In June of 2008 the employee was laid off due to a lack of work. The employee filed a claim for unemployment benefits on June 18, 2008, and has filed weekly claims thereafter, receiving regular benefits, emergency unemployment benefits and extended benefits. His weekly benefit amount for this claim is $355.

In September of 2009 the employee was given an opportunity to make a one-time withdrawal of up to $50,000 from his retirement account. During the week of September 13, 2009 (week 38), the employee applied to withdraw $25,000. He received a lump sum payment of $25,000 from the account on September 28, 2009 (week 40).

The issue to be decided is whether the employee was receiving a pension payment of as week 38 of 2009 and, if so, what portion of those payments should be treated as deductible income for any week claimed.

Wis. Stat. § 108.05(7) provides, in part, as follows:

(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.

(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.

(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.

The employee's retirement account was totally employer funded. It is undisputed that the employer or employers made all the contributions to the fund and that no contributions were made by the employee himself. While at the hearing the business manager for Local 159 indicated that the monies going into the retirement fund come out of workers' annual increases and that members vote on how much to put into the pension and how much to take in wages, a wage agreement that results in increased employer contributions to a retirement plan in exchange for a surrender in wages does not constitute a direct contribution to the pension plan by the employees. See, Department of Labor Unemployment Insurance Program Letter No. 22-87, Change 2, February 3, 2003; Paul M. Murphy v. LIRC and Miron Construction Company, Inc., Case No. 06 CV 125 (Wis. Cir. Ct., Oconto Co., June 18, 2007).

Where the retirement account was solely employer funded, and where the employee worked and earned wages during his base period from an employer that made contributions into the pension account which affected the employee's eligibility for benefits or increased the amount of his pension payments, his entitlement to unemployment is appropriately reduced in accordance with the statute.

The employee's weekly pension reduction is determined by dividing the gross amount of the lump sum payment, $25,000, by the employee's most recent full weekly wage rate, $1,265. This number reflects the total number of weeks to which the lump sum pension payment will be assigned. As a result, the employee's weekly pension reduction amount is $1,265 for weeks 38 of 2009 through week 4 of 2010, and $977 for week 5 of 2010.

The commission therefore finds that beginning in week 38 of 2009 the employee was actually or constructively receiving a pension payment that, when apportioned, reduced and calculated on a weekly basis amounted to $1,265. As a result, benefits otherwise payable for a complete week of partial or total unemployment are reduced by that amount, within the meaning of Wis. Stat. § 108.05(7).

The commission further finds that in week 5 of 2010 the employee was actually or constructively receiving a pension payment that, when apportioned, reduced and calculated on a weekly basis amounted to $976.40. As a result, benefits otherwise payable for a completed week of partial or total unemployment are reduced by that amount, within the meaning of Wis. Stat. § 108.05(7).

The commission further finds that the employee was paid benefits in weeks 38 of 2009 through week 44 of 2009 in the total amount of $2,309, for which he was not eligible and to which he was not entitled, within the meaning of Wis. Stat. § 108.03(1).

A secondary issue presented in this case is whether the overpayment of benefits to the employee was because of departmental error or was partially or wholly because of the employee's actions, and whether the department is required to waive recovery of any portion of the overpayment.

"Departmental error" is an error made by the department in computing or paying benefits which results from a mathematical mistake, miscalculation, misapplication or misinterpretation of the law or mistake of evidentiary fact, whether by commission or omission, or misinformation provided to a claimant by the department on which the claimant relied. Wis. Stat. § 108.02(10e).

Benefits which were overpaid in weeks 38 through 40 of 2009, in the total amount of $1,065, were not overpaid because of any error on the part of the department. As such, that portion of the overpayment cannot be waived and must be repaid. However, benefits which were erroneously paid to the employee beginning in week 41 of 2009 were paid because the appeal tribunal misapplied the law to find that the employee's pension payment did not affect his eligibility for unemployment insurance. This constitutes a department error for which recovery of the overpaid benefits, beginning in week 41 of 2009, in the total amount of $1,244, must be waived.

The commission, therefore, finds that waiver of benefit recovery in weeks 38 through 40 of 2009 is not required under Wis. Stat. § 108.22(8)(c), because although the overpayment did not result from the fault of the employee as provided in Wis. Stat. § 108.04(13)(d), the overpayment was not the result of a department error.

The commission, further, finds that waiver of benefit recovery beginning in week 41 of 2009 is required under Wis. Stat. § 108.22(8)(c), because the overpayment was the result of a department error and did not result from the fault of the employee, as provided in Wis. Stat. § 108.04(13)(d).

DECISION

The decision of the administrative law judge is modified as to the week of issue and, as modified, is reversed. Accordingly, as of week 38 of 2009, benefits otherwise payable for any week of partial or total unemployment are reduced by $1,265 and, in week 5 of 2010, benefits otherwise payable are reduced by $977. The employee is required to repay a total of $1,065 to the Unemployment Reserve Fund. This decision also results in an overpayment of Federal Additional Compensation (FAC) benefits. The employee will receive a separate "UCB-25 Notice of Federal Additional Compensation Overpayment" regarding the amount of FAC benefits that must be repaid.


Dated and mailed July 16, 2010
ostrows . urr : 164 : 1 UW 980

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

MEMORANDUM OPINION

The appeal tribunal found that because the employee did not retire but withdrew a lump-sum during a period of economic hardship, his withdrawal was not from a "pension." However, the department does not consider the employee's eligibility for retirement when determining whether a payment constitutes a pension. A lump sum payment to an individual who is not yet eligible for retirement payments can nonetheless constitute a pension. Abler v. Brunswick Corp., UI Hearing No. 09004903FL (LIRC Feb. 13, 2009).

In finding that the employee did not receive a pension that affected his eligibility for benefits, the appeal tribunal also relied on the fact that the employee was receiving federally funded benefits and not benefits funded by his base period employer. However, the statutory criteria for benefit reduction is whether the employee had base period wages from the employer from which the pension was received. See Wis. Stat. § 108.05(7)(e)1. The question of whether the benefits are paid by the employer or are federally funded does not affect the outcome.

The appeal tribunal additionally reasoned that the employee's base period work for the employer did not affirmatively affect his eligibility for the $25,000 payout, which the administrative law judge noted surely accrued prior to his base period. The commission addressed this argument in a recent decision in which it stated, in relevant part:

"The employee cannot artificially segregate his pension payments so as to support a claim that the amount he withdrew was not based upon current contributions but was based upon contributions made earlier. . . Where, as here, the claimant performed work for his base period employer, which then generated additional payments into his pension fund, it cannot reasonably be said that the work did not affect his eligibility for the pension or increase its amount."

Daniel L Walker, UI Hearing No. 09005799MD (LIRC July 8, 2010).

As noted by the department in its brief, if a claimant is allowed to take out everything but the last contributions made by the employer since the start of the base period, the entire statutory offset would be undermined.

NOTE: The commission did not confer with the administrative law judge about witness credibility prior to reversing. The facts here are not in dispute. The commission's reversal is as a matter of law.

cc: Mark Hoffmann
Daniel J. La Rocque



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