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


ANNE T KREINUS, Claimant

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 98603134MW


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.

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 agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.

DECISION

The decision of the administrative law judge is affirmed. Accordingly, as of week 2 of 1998, benefits otherwise payable for a week of partial or total unemployment are reduced by $100.72. The claimant is required to repay $1,313.00 to the Unemployment Reserve Fund.

Dated and mailed: February 9, 1999
kreinan.usd : 132 : 1 UW 980

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

The claimant has petitioned for commission review of the adverse appeal tribunal decision which found that her unemployment benefits must be reduced based on her receipt of a pension payment. For reasons set forth below, the commission affirms the appeal tribunal decision.

The claimant filed a claim for benefits on January 7, 1998, making her base period the last quarter of 1996 and the first three quarters of 1997. Her only base period employer was Firstar Bank. Her weekly benefit rate was $149.00. The claimant began receiving social security disability payments in 1971. The amount of the payment, before sums for Medicare Insurance were deducted, was $872.80 effective July 1, 1998. The claimant's employment at Firstar Bank had no effect upon the amount of or her eligibility for disability benefit. She can earn $8,400.00 before her disability income is taken away.

Wisconsin Statute § 108.05(7)(a) defines a pension payment as:

"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 the claimant has base period wages."

Wisconsin Statute § 108.05(7)(f), states, in relevant part:

"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 social security act (42 USC 301 et seq.) or 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 ALJ found that the claimant's disability benefit was paid under the Social Security Act. The ALJ further found that the disability benefit was based on her previous employment as she needed quarters of coverage, i.e. employment on which Social Security taxes were paid, under the Social Security Act to be eligible for the disability benefit.

The claimant argued at the hearing that her receipt of a disability benefit should not reduce her UI benefits as her employment at Firstar Bank, Inc., had no bearing on her receipt of disability. The ALJ rejected such argument noting that that the requirement that an individual's work for base period employers affirmatively affected the amount of, or a person's eligibility for, a pension benefit applies to private pension plans and not governmental pension payments. The ALJ concluded that the claimant's receipt of disability benefits under the social security act constituted a "pension payment" and therefore her UI benefits had to be reduced by one-half of the pension amount. The ALJ's finding resulted in an overpayment of $1,313.00. The ALJ further found that recovery of overpaid benefits could not be waived because the claimant was at fault for failing to report to the department her receipt of a social security payment.

The provision providing that UI benefits be reduced based on receipt of a pension payment is a FUTA requirement. 26 USCS 3304(a) provides:

"(15) the amount of compensation payable to an individual for any week which begins after March 31, 1980, and which begins in a period with respect to which such individual is receiving a governmental or other pension, retirement or retired pay, annuity, or any other similar periodic payment which is based on the previous work of such individual shall be reduced (but not below zero) by an amount equal to the amount of such pension, retirement or retired pay, annuity, or other payment, which is reasonably attributable to such week except that --

(A) the requirements of this paragraph shall apply to any pension, retirement or retired pay, annuity, or similar periodic payment only if --

(i) such pension, retirement or retired pay, annuity, or similar payment is under a plan maintained (or contributed to) by a base period employer or chargeable employer (as determined under applicable law), and

(ii) in the case of such a payment not made under the Social Security Act or the Railroad Retirement Act of 1974 (or the corresponding provisions of prior law), services performed for such employer by the individual after the beginning of the base period (or remuneration for such services) affect eligibility for, or increase the amount of, such pension, retirement or retired pay, annuity, or similar payment, and

(B) the State law may provide for limitations on the amount of any such a reduction to take into account contributions made by the individual for the pension, retirement or retired pay, annuity, or other similar periodic payment;"

The ALJ correctly found that where social security payments are concerned it is not a requirement that the payments be paid from a plan contributed to by a base period employer or that services performed for the employer affect the individual's eligibility for, or increase the amount of, the retirement payment. Wis. Stat. § 108.04(7)(f)(2) and 26 USCS 3304 (a)(15)(A)(ii).

As previously noted, the claimant's disability payment is based on previous work as she needed quarters of coverage. Further, Firstar Bank is a base period employer (her only base period employer) for whom the claimant worked as an employe and the employer contributed to social security system based on her wages. The claimant's primary argument in her petition is that she is not receiving a "pension" payment nor similar payment, rather, she is receiving a "disability" payment unrelated to retirement. However, the commission and the department focus not on when the payments are received -- pre- or post-retirement age -- but on whether an employer contributed to the plan/fund from which the payments come. The department's policy provides:

"Social security disability payments qualify as pension payments because the amount received is based on work performed. It is subject to the 50% reduction.

Supplemental Security Income (SSI) is NOT treated as deductible income as it is not based on the claimant's work.

Any lump sum or periodic payment made from a 401K plan is NOT considered a retirement/pension payment. It is not treated as deductible income.

Wisconsin Unemployment Compensation Manual, Vol. 3, Part VII, Ch. 6, p. 32.

The commission has addressed the claimant's argument in prior cases. Michael A. Rauth, UI Dec. Hearing No. 92608906MW (LIRC Dec. 15, 1993), involved a claimant who was legally blind since birth and who was receiving SSDI. The claimant applied for UI benefits when laid off from his work. The commission found that his UI benefits had to be reduced by the appropriate amount of weekly SSDI stating:

"The claimant argues that his disability payments are not similar to the listed pension payments because those payments envision permanent withdrawal from the work force unlike his disability payments which is paid regardless of whether the claimant worked. However, the same argument can be made for other kinds of wage substitutes, such as workers compensation temporary disability payment, however, such wage substitutes are treated in other sections of the statutes. Historically the US Department of Labor has treated SSI and dependent's allowance as not based on previous work and therefore as not reducing the weekly unemployment compensation benefit amount. Unemployment Insurance Program Letters No. 43-80 at p. 3 and 24-80.

The commission sympathizes with the claimant's position, but unfortunately cannot reverse the appeal tribunal decision. To find his disability payments did not reduce his unemployment compensation benefits would be to depart from the department's longstanding position. Unemployment Insurance Program Letter 22-87, April 30, 1988 does indicate that "primary social security, old age and disability retirement benefits are to be used to reduce the weekly benefit amount. Thus, the Department of Labor clearly meant payments such as those received by the claimant would reduce the weekly benefit amount, which is consistent with both the department's policy and with the general framework of the unemployment compensation statutes, the commission must affirm the decision of the administrative law judge."

The commission reached the same conclusion in Mary C. Bonneau, UI Dec. Hearing No. 98200428RH (LIRC Jul. 8, 1998), stating:

"In her petition for commission review the claimant asserts that there is a great difference between payments made by the Social Security Administration for retirement and for disability, which she does not find defined in the Wisconsin Statutes. She believes that she is receiving disability payments, not retirement, which should be exempt. According to department policy Supplemental Security Income (SSI) is not treated as deductible income, because it is not based on a claimant's work. However, social security disability payments such as the claimant receives qualify as pension payments because the amount received is based on work performed. Unemployment Compensation Benefits Manual, Vol. 3, Part VII, Chapter 6, page 32. Given the language of the statutes and the nature of the payments received by the claimant, the claimant's benefits must be reduced by $76.61 per week."

Finally, the most recent U.S. Department of Labor directive, Unemployment Insurance Program Letter No. 22-87, issued on April 30, 1998, replaced the prior directives on the pension offset issue and was to clarify which payments were subject to the offset. It did not specifically state that all social security disability payments were subject to the offset. However, it repeated what had been contained in prior letters, namely, that "primary social security old age and disability retirement benefits" are subject to the pension offset requirement. Since the language has not changed, the commission has found no compelling reason to change its interpretation of that language or of Wis. Stat. § 108.05(7). For these reasons, and for the reasons set forth in the appeal tribunal decision, the commission affirms that decision.

cc: ATTORNEY BRENDA LEWISON

GREGORY A FRIGO
DIRECTOR, BUREAU OF LEGAL AFFAIRS


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