03. Benefit Computation Factors

Brennan v Michigan Bell Telephone Co – 3.08

Brennan v Michigan Bell Telephone Co
Digest no. 3.08

Section 27(f)

Cite as: Brennan v Michigan Bell Tel Co, Unpublished Opinion of the Midland County Circuit Court, Issued February 3, 1998 (Docket No. 97-6843-AE-L).

Appeal pending: No
Claimant: John W. Brennan
Employer: Michigan Bell Telephone Company
Docket no.: B93-17227-130278
Date of decision: February 3, 1998

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CIRCUIT COURT HOLDING: Pension benefits accepted as a lump sum and rolled over into an IRA subject a claimant’s unemployment benefits to reduction, notwithstanding preferential tax treatment for IRA programs.

FACTS: Claimant was terminated from his employment at Michigan Bell Telephone Company in September of 1993. At the time, Claimant was over 59 years of age. Because of his age and the fact that he had worked for the company and its predecesors for over 37 years, Claimant was eligible to receive pension benefits. Instead of accepting long-term annuity payments, Claimant elected to receive a lump sum payment in the amount of $566,951.47 in January of 1994, which he promptly rolled over into an IRA.

Due to his involuntary termination, claimant sought to collect unemployment compensation benefits from the MESA. However, although his termination qualified him for such benefits, UIA determined that his pension benefits completely offset his ability to collect unemployment benefits. Claimant appealed decisions of a Referee and the Board of Review to the Circuit Court.

DECISION: Claimant’s benefits were subject to reduction under Section 27(f) due to his voluntary acceptance of a lump sum pension payment, notwithstanding his choice to rollover those funds into an IRA.

RATIONALE: Although the US Department of Labor did not intend FUTA benefits, including “rollover distributions,” to be coordinated with retirement benefits for taxation reasons, an opinion letter written by the USDOL was not binding on the Court’s interpretation of Section 27(f). Further, since the choice to take the pension benefits was voluntary on the part of the employee, there was no “pyramiding” of benefits, meaning claimant was not forced to use the benefits for a different purpose than intended.  Despite the fact that there would be a federal tax penalty for the use of the funds that the Michigan legislature requires claimant to use for transitional economic assistance, claimant’s unemployment benefits are still subject to reduction.

Digest Author: Nick Phillips
Digest Updated: 8/14