Retirement Benefits and Unemployment Compensation Benefits

Do you administer your own unemployment compensation claims? If so, you probably know that Michigan’s unemployment statute provides for coordinating benefits under the statute with retirement benefits.

The language of the statute remained essentially unchanged since 1954, yet questions remained to be answered by the Michigan Supreme Court. We now have a decision. What does this decision mean?

It has long been understood that an employer who has contributed to the funding of a retirement plan under which a claimant for unemployment compensation benefits is receiving, or will receive, a retirement benefit is subject to the coordination provisions. Coordination occurs whether the retirement benefit is paid in installments or in a lump sum.

Please note that this coordination is, at present, limited to retirement benefits from a plan sponsored by the employer against whom the unemployment benefits would be charged. There is no coordination under current law for retirement benefits attributable to work for previous employers.

The issue now resolved is whether coordination with the employer’s retirement benefits takes place where the employee does not draw benefits under the retirement plan but, instead, elects to have the retirement plan funds rolled over into an IRA. The answer is the coordination provision applies.

Therefore, whenever an employee participated in your retirement plan leaves and seeks to draw unemployment benefits, be certain that those benefits are subject to coordination.