PENSION OFFSET, IRA Rollover, Retirement Benefits Receipt
CITE AS: Koontz v Ameritech Services Inc, 466 Mich 304 (2002)
Appeal pending: No
Claimant: Nancy Koontz
Employer: Ameritech Services, Inc.
Docket No. B95-13491-138951
SUPREME COURT HOLDING: The governing statute, Section 27(f)(1), mandates coordination of claimant’s unemployment benefits with her pension benefits.
FACTS: Claimant worked at employer’s Traverse City office for 30 years until employer permanently closed that office. Claimant had the option of transferring to another location or retiring. Claimant chose to retire, and elected to roll over the lump-sum distribution of her employer-funded pension into her IRA instead of receiving a monthly annuity. Claimant applied for unemployment benefits and the Unemployment Agency determined her weekly benefit rate was subject to reduction under Section 27(f) by the pro-rated weekly retirement benefits the claimant would have received if she had taken the monthly annuity.
DECISION: Claimant’s unemployment benefits are subject to reduction under Section 27(f).
RATIONALE: Section 27(f)(1) requires “narrow coordination,” i.e. offset of unemployment benefits if the employer charged for unemployment benefits funded the retirement plan. In March 1980, Congress amended FUTA, 26 USC 3304(a)(15), to require “broad coordination,” meaning unemployment benefits would be offset by retirement benefits regardless of whether the charged employer funded the retirement benefits. Michigan enacted Section 27(f)(5) to comply with the new federal law.
Congress then amended 26 USC 3304(a)(15) in September 1980 and returned to “narrow coordination,” Michigan, however, did not similarly amend Section 27(f). Section 27(f)(1) “always requires coordination of pension benefits that the chargeable employer contributed.” Section 27(f)(5) may require coordination of pension benefits based on previous work if required to conform to federal law.
“Liquidation” as used in Section 27(f)(4)(a)(ii) requires distribution of all assets held in a pension fund for all employees. Distribution of a single employee’s vested interest is not liquidation of the pension fund. Claimant could have elected a monthly annuity.
Claimant “received” her retirement benefits within the meaning of Section 27(f)(1), notwithstanding the fact the employer transferred the funds to her IRA. The funds were transferred at her direction, she accepted them by directing their delivery to her account, and could still access the funds by making a withdrawal.