DAR File No. 27193

Workforce Services, Workforce Information and Payment Services

R994-401-207

Retirement or Disability Retirement Income

NOTICE OF PROPOSED RULE

DAR File No.: 27193
Filed: 05/28/2004, 03:05
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This amendment changes the provision on social security reductions to match the recent change to the Employment Security Act in H.B. 8 (2004). (DAR NOTE: H.B. 8 (2004) is found at UT L 2004 Ch 246, and was effective 05/03/2004.)

Summary of the rule or change:

A claimant's unemployment benefits were reduced by 100% of Social Security benefits. H.B. 8 changed that to 50%. This rule change is being made to reflect the statutory change. At the current time, the department is rewriting all of its unemployment rules. This section has been rewritten as part of that project. Apart from the social security reduction, there are no other substantive changes.

State statutory or constitutional authorization for this rule:

Section 35A-4-401

Anticipated cost or savings to:

the state budget:

There will be no costs or savings to the State budget because this is a federally-funded program. This rule change is only being made to bring the rule into compliance with recent statutory changes. If there were costs associated with that change, it was contemplated by the legislature at the time.

local governments:

In addition to the reasons stated in relation to the State budget, there will be no costs or savings to local government as this is a federally-funded, state-wide program that does not affect local government.

other persons:

There will be no cost or savings to any person for the reasons stated in relation to the State budget.

Compliance costs for affected persons:

There will be no compliance costs to any person for the reasons stated in relation to the State budget.

Comments by the department head on the fiscal impact the rule may have on businesses:

This change will have no fiscal impact on any business in Utah as it merely codifies the new legislative changes.

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at spixton@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/16/2004

This rule may become effective on:

07/19/2004

Authorized by:

Raylene G. Ireland, Executive Director

RULE TEXT

R994. Workforce Services, Workforce Information and Payment Services.

R994-401. Payment of Benefits.

R994-401-207. Retirement or Disability Retirement Income.

[(1) Subsection 35A-4-401(2)(c) and (d) establish the provisions under which a Weekly Benefit Amount must be recomputed because a claimant is eligible to receive a retirement benefit or receives credit against retirement income previously overpaid. Retirement income is treated differently from severance pay or other earnings as the Weekly and Maximum Benefit Amounts are reduced by 100% of the amount of the retirement income attributable to the week, including that portion which is based on the claimant's contribution to the retirement fund.

(2) Elements.

All of the following factors must be shown to exist before the Weekly Benefit Amount will be recomputed:

(a) The claimant must be eligible to receive a periodic retirement income. Retirement income is defined as a pension or plan, paid for at least in part by an employer as contrasted to a IRA, KEOGH or other savings program which provides periodic payments following discontinuance of service to an individual who qualifies for the payment because of age, length of service, disability or combination of these qualifications. If the amount of the disability payment is not determined at least in part by years of service, it is not a retirement income. Payments not considered retirement income are those resulting from a special program which insures other reasons for discontinuance of employment including worker's compensation due to a temporary disability, black lung disability income, and benefits from the Department of Veterans Affairs. In these cases, even though the entitlement is partially dependent upon prior service, the amount of the payment is determined by the disability and not the length of employment. Lump sum payments made at the time of separation are not considered a retirement benefit even when drawn from the employer's contributions to a fund established for the purpose of retirement. Lump sum payments may be treated as a severance pay, see Subsection 35A-4-405(7).

(b) The Retirement is Based on Previous Employment.

As long as the entitlement was established as the result of the claimant's prior employment, not an income received as a spouse or beneficiary, it is deductible from the Weekly Benefit Amount, regardless of whether it is paid by a former employer, a government entity, the Social Security program, or any other pension provider.

(c) The Pension or Payment Plan is Maintained or Contributed to By a Base Period Employer.

If the claimant is receiving a retirement income from an employer for whom he did not work during the base period of his claim, the retirement benefit will not be deducted from his Weekly Benefit Amount. However, for example, if the claimant is entitled to a pension under the Social Security program, and any base period employer contributed to Social Security, regardless of whether the annuity is based on that employment, 100% of the Social Security benefit would be deductible.

(d) The Claimant is Receiving Retirement Payments Attributable to the Benefit Year.

If the claimant is not in "receipt" of retirement income, the Weekly Benefit Amount will not be reduced. For example, a claimant who has qualified for Social Security benefits but then has earnings which preclude his receipt of Social Security payments for the balance of that calendar year, would not have his Weekly Benefit Amount recomputed. The term "receipt" means the act of receiving. A claimant who is eligible for, but not receiving retirement income will not have his Weekly Benefit Amount reduced; however, if he subsequently receives a retroactive payment of retirement benefits which, if received during the time unemployment insurance claims were filed, would have resulted in a reduced payment, an overpayment will be established. The period of time the payment represents, not the time of the receipt, is the determining factor. An assumption that a claimant is entitled to receive a pension, even if correct, is not sufficient basis to recompute the Weekly Benefit Amount. However, if a claimant has applied for a pension and expects to be determined eligible for a specific amount attributable to weeks when Unemployment Insurance benefits are payable, and the claimant is only awaiting receipt of those payments, a reduction of the claimant's Weekly Benefit Amount will be made.

(3) Overpayment Liability.

A claimant who could be eligible for a retirement income, but chooses not to apply until after the Unemployment Insurance benefits have been paid, will be at fault for any overpayment resulting from a retroactive payment provided he was notified that a retroactive payment would result in an overpayment. He is at fault because he chose, after being made aware of the potential reduction, not to "receive" the retirement benefit to which he was entitled thereby preventing the Department from recomputing the Weekly Benefit Amount.

(4) Recomputation of Weekly and Maximum Benefit Amounts.

If the claimant's receipt of a retirement income is established at the time the claim is filed, the Weekly Benefit Amount will be computed less 100% of the retirement income. If the claimant becomes eligible to receive a retirement income after the beginning of the benefit year, his Weekly Benefit Amount will be recomputed effective with the first full calendar week during his benefit year in which he became eligible to receive retirement benefits and may be recomputed when the retirement benefit is increased. The Maximum Benefit Amount is then determined by dividing the unused benefits before retirement income is deducted by the Weekly Benefit Amount which did not include the deduction for retirement income; the resultant number, disregarding any fraction is then multiplied by the recomputed Weekly Benefit Amount to give the new Maximum Benefit Amount. For example, the claimant is entitled to receive $186 for 26 weeks without retirement deductions. His retirement benefit is $86 per week and therefore his recomputed Weekly Benefit Amount is $100. $186 x 26 = $4,836; $4,836 divided by $186 = 26. Therefore, his recomputed Maximum Benefit Amount is $100 x 26, or $2,600. If he had received $336 in benefits before he became eligible to receive retirement income, his Maximum Benefit Amount would be determined by dividing $4,500 by $186 which equals 24. The $100 Weekly Benefit Amount is then multiplied by 24 which equals a recomputed Maximum Benefit Amount of $2,400.](1) A claimant's weekly benefit amount is reduced by 100% of any retirement benefits, social security, pension or disability retirement pay (referred to collectively in this section as "retirement benefits" or "retirement pay") received by the claimant. Except, for social security retirement benefits, the reduction is 50% for claims with an effective date on or after July 4, 2004 and on or before July 2, 2006. The payments must be:

(a) from a plan contributed to by a base-period employer. Payments made by the employer for whom the claimant did not work during the benefit year are not counted. Social security payments are counted if a base period employer contributed to social security even if the social security payment is not based on employment during the base period.

(b) based on prior employment and the claimant qualifies because of age, length of service, disability or any combination of these criteria. Disability payments must be based, at least in part, by length of service. Savings plans such as a 401(k), or IRA should not be used to reduce the weekly benefit amount. Payments from worker's compensation for temporary disability, black lung disability income, and benefits from the Department of Veterans Affairs are not counted because the amount of the payment is based on disability and not on length of service. Payments received as a spouse or beneficiary are not counted. That portion of retirement benefits payable to a claimant's former spouse is not counted if the paying entity pays the former spouse directly and it is pursuant to court order or a signed, stipulated agreement in accordance with the law;

(c) periodic and not made in a lump sum. Lump sum payments, even if drawn from the employer's contributions to a fund established for the purpose of retirement, are not treated as severance pay under 35A-4-405(7); and

(d) payable during the benefit year. A claimant's WBA is not reduced if the claimant is eligible for, but not receiving retirement income. However, if the claimant subsequently receives a retroactive payment of retirement benefits which, if received during the time unemployment insurance claims were filed would have resulted in a reduced payment, an overpayment will be established. The period of time the payment represents, not the time of the receipt, is the determining factor. An assumption that a claimant is entitled to receive a pension, even if correct, is not sufficient basis to recompute the Weekly Benefit Amount. However, if a claimant has applied for a pension and expects to be determined eligible for a specific amount attributable to weeks when Unemployment Insurance benefits are payable, and the claimant is only awaiting receipt of those payments, a reduction of the claimant's Weekly Benefit Amount will be made.

(2) A claimant who could be eligible for a retirement income, but chooses not to apply until after the Unemployment Insurance benefits have been paid, will be at fault for any overpayment resulting from a retroactive payment of retirement benefits.

(3) The formula for recomputation of the Maximum Benefit Amount in the event a claimant begins receiving retirement income after the beginning of the benefit year is found in 35A-4-401(2)(d).

KEY: unemployment compensation, benefits[*]

[August 15, 1995]2004

Notice of Continuation May 23, 2002

35A-4-401(1)

35A-4-401(2)

35A-4-401(3)

35A-4-401(6)

ADDITIONAL INFORMATION

PLEASE NOTE:

• Text to be deleted is struck through and surrounded by brackets (e.g., [example]). Text to be added is underlined (e.g., example). Some browsers may not depict some or any of these attributes on the screen or when the document is printed.
• Please see the DISCLAIMER regarding information available from state web pages.

For questions regarding the content or application of this rule, please contact Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at spixton@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.