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Retirement Payments - Section 8-1008 - Maryland Unemployment Decisions Digest

 

Introduction

The provisions dealing with retirement payments are located in Section 8-1008 of the Labor and Employment Article of the Maryland Annotated Code.

Section 8-1008 defines a "retirement payment" as a payment in the form of a pension, annuity, retirement or retired pay from a trust, annuity, profit sharing plan, insurance fund, annuity or insurance contract, or any other similar lump sum or periodic payment that is based on any previous covered employment for a base period employer under a plan paid for wholly or partly by a base period employer.

If the base period employer paid all of the contributions to the retirement plan, 100 percent of the retirement payments is deductible from the claimant's benefits. If the claimant contributed anything to the retirement plan, 50 percent of the retirement payments is deductible. If the retirement payments come entirely from an employer who is not a base period employer, there are no deductions from benefits. Also, if the claimant made 100 percent of the contributions to the retirement plan, there is no deduction from benefits.

If the weekly amount of the deductible portion of the retirement payment at least equals the claimant's weekly benefit amount, the claimant is disqualified from receiving benefits for that week. However, if the weekly amount is less than the claimant's weekly benefit amount, the claimant may receive benefits reduced by the amount of the retirement payment.

A lump sum pension means the gross amount of a pension that is paid in one payment. Any pension paid in more than one payment is not a lump sum pension, even if the payments are paid irregularly.

The Court of Special Appeals dealt with the question of what is a lump sum for the purposes of disqualification under Section 8-1008(b) in the case of Cogdell, Facello and Williams v. Department of Economic and Employment Development, 104 Md. App. 575, 657 A.2d 363 (1995), September Term, 1994. In this case, the appellants elected to retire after the employer closed the division where they worked. The employees were entitled to a special payment which represented payment for the first three calendar months following the month of retirement, followed by a monthly pension thereafter. The issue was whether or not the special payment was a nondeductible lump sum pension payment. The Court of Special Appeals affirmed the Board and the Circuit Court and held that the special payment was a part of the periodic pension payments and disqualified the appellants during the entire 13-week period covered by the special payment. The Court reasoned that the special payment represented an aggregation of the first three monthly installments due under the pension. The Court also held that the portion of the special payment that represented vacation pay should have been excluded from the gross value of the special payment. The remaining pension portion should then be prorated over the 13-week period.

To calculate the number of weeks to which a lump sum payment applies, the claimant's last gross weekly salary is divided into the lump sum amount; the resulting figure represents the number of weeks for which the lump sum is deductible.

If a lump sum payment was paid for in part by the claimant's contributions, the payment is attributed to a number of weeks using the formula in the above paragraph. Then, for each week, an amount equal to 50 percent of the claimant's last gross weekly salary is deducted from the claimant's benefits.

A disqualification due to retirement payments begins with the first week that the claimant is unemployed and does not depend on the date the claimant actually filed for benefits.

A lump sum retirement payment that is paid as a result of a layoff or shutdown is not deductible from a claimant's unemployment insurance benefits. If the claimant's separation from employment was not due to a layoff or shutdown, a lump sum payment is deductible from benefits unless the claimant places the lump sum in a qualified retirement plan within 30 days of receiving it and provides proof of this to the agency.

Certain pension payments are not deductible from unemployment insurance benefits. These nondeductible payments include Social Security benefits, survivors' or widows' pensions, military service connected disability compensation (Veterans' Administration Disability Benefits), temporary disability insurance, and workers' compensation and black lung benefits.

 

Retirement Payments - Section 8-1008

I. In General

 

A. Payments Which Constitute Retirement Payments
Special retirement pay received by the claimant, which was part of the regular pension plan, which had nothing to do with the plant closing, and which was not received by all severed employees but only those eligible for the regular pension, is deductible under Section 8-1008 as a lump sum pension. This payment does not constitute a dismissal payment within the meaning of Section 8-1009. Jancewski v. Bethlehem Steel Corporation, 2150-BH-83.

A special payment made to employees upon the permanent shutdown of the employer's plant is a pension under Section 8-1008 where the money is received from the company pension fund, where all employees participating in the pension plan receive the benefit and where the shutdown agreement deals with and provides for "severance pay" in a separate section. Borkowicz v. Airco Welding Company, 1076-BR-85.

B. Payments Which Do Not Constitute Retirement Payments
At the time of the layoff, the claimant was paid a lump sum "nonvested pension benefit." This amount was obtained from a special employer fund for "closing costs" and was intended to provide additional severance pay to certain employees who did not have vested pension rights. The lump sum is properly considered severance pay under Section 8-1009 and not a pension, annuity, retirement or retired pay under Section 8-1008. The money was not obtained from a pension fund and was intended as additional severance pay to those employees, including the claimant, who lost their opportunity to gain vested pension rights due to the closing of the store. Carey v. Stewart and Company, 717-BH-83.

The claimant received a $366.55 lump sum repayment of her own contribution to a new pension plan. This was not deductible from benefits. The receipt of a lump sum amount representing a worker's own retirement contributions is not the receipt of a pension within the meaning of Section 8-1008. Since there was no contribution made by the employer, this amount does not fall under Section 8-1008. Thompson v. Hutzler Brothers Company, 845-BR-87.

C. Contributory Pensions and Proration
A claimant's weekly benefit amount shall be reduced by one-half of the calculated weekly pension amount, where the claimant contributed toward the pension. Tosches v. Baltimore City Department of Public Works, 1486-BR-82.

The claimant was receiving a pension in the amount of $807 per month. This was a contributory pension, therefore, under Section 8-1008, only half of such a pension amount should be deducted from benefits. Thus, only $403.50 per month should be deducted from the claimant's benefits. This reduction will remain in effect as long as this pension is received in this amount and the Department of the Army remains a base period employer. Thomas v. Department of the Army, 143-BR-89.

The crucial question in a case where there is more than one retirement plan is not what happened during the base period. The crucial questions are: (1) Which plan provides the retirement payment; and (2) Did a base period employer pay the full cost of this plan. If a base period employer paid the full cost of the plan which is providing the retirement payment, it makes no difference that the claimant was contributing to another plan of the employer during the base year. Yaker v. Department of Housing and Community Development, 1405-BH-92.

D. Noncontributory Pensions
A noncontributory pension is directly deductible from unemployment insurance benefits. Jancewski v. Bethlehem Steel Corporation, 2150-BH-83.

E. Dates of Disqualification
Where a "Special Retirement Payment" is in an amount much greater than the regular monthly pension payments normally due between the first date of the layoff and the first date of the receipt of the regular monthly pension, it is appropriate to divide the "Special Retirement Payment" by the claimant's weekly salary and to make deductions from the first week of unemployment. Jancewski v. Bethlehem Steel Corporation, 2150-BH-83.

Where a "Special Retirement Payment" is made for a specific three-month period which does not even begin until the claimant's retirement date, which is months after the date of the claimant's layoff, the Section 8-1008 disqualification should begin at the retirement date. In this context, "separation from employment" means date of retirement. Humphrey v. Bethlehem Steel Corporation, 285-BR-85.

F. Requirement That Payment Be Received
The claimant became separated from his employment on March 28, 1989 but the separation was not due to a layoff or shutdown of operations. The claimant was entitled to a share of the employer's profit sharing plan. The plan was noncontributory by the claimant. The employer was under no obligation to distribute the money to the claimant until the claimant reached age 65, approximately 17 years later. However, the employer could distribute the money as early as January, 1990 and intended to do so. The amount was $5800. Where a claimant is entitled to a lump sum payment that is not due upon the actual beginning of the period of unemployment, that lump sum payment should be allocated to a number of weeks following the date of separation, but beginning only with those weeks for which the lump sum is actually payable. Lack of entitlement to receive a lump sum payment prohibits the application of a Section 8-1008 penalty. Chinn v. Bedding Barn, Inc., 841-BH-89.

The claimant was entitled to receive two lump sum pension payments after he was separated from his job. Although there was a delay in the actual payment of the money due to administrative processing, the claimant was entitled to the money at the time he was separated. Where the entitlement to the pension corresponds to the date of unemployment, but there has been an administrative delay in the actual payment of the money, a delay in the application of the Section 8-1008 penalty is not appropriate. Payments are deductible beginning with the claimant's first week of separation. Puffenberger v. Hobby House Press, Inc., 1093-BR-91.

In cases where the actual receipt of a lump sum pension or profit sharing payments is so far in the future that the receipt of this amount cannot be reasonably related to a current claim for benefits, a pension reduction will not be made from unemployment benefits. Carmichael v. Credit Bureau of Baltimore, Inc., 495-BR-90.

The claimant's job was abolished in January, 1993. He became eligible to receive a noncontributory periodic pension from this employer, in the amount of $2,250.00 per month. However, the claimant did not receive the first installment of this periodic pension payment until March 4, 1993. This pension amount should only be allocated beginning in the month of March, 1993. Statutory terms should be given their ordinary and commonly accepted meaning. Section 8-1008 states that the disqualification applies "for each week in which...an individual...receives a retirement payment." The statute does not state "will receive" or "earned." The plain and commonly accepted meaning of "receives" means that the claimant actually has possession of the pension amount. Carr v. Tracor Applied Sciences, Inc., 2030-BH-93.

G. Divorce Decree Affecting Amount
The claimant was entitled to a noncontributory pension in the amount of $928.99 per month. The claimant was divorced. According to the divorce settlement agreement, the claimant's ex-wife became an alternate payee of the pension plan. The claimant's ex-wife thus became entitled to 40 percent of the claimant's benefits at the time that they were received by the claimant. The claimant's ex-wife also became entitled to the status of surviving spouse in the event the claimant died. The pension was paid in full to the claimant, and the claimant then remitted 40 percent of the amount to his ex-wife. The Board held that the entire amount of the pension is deductible. Title to the pension was not transferred to the claimant's ex-wife. The 40 percent which the claimant must pay to his ex-wife is a legal obligation which he fulfills from this pension amount, but it does not represent the ex-wife's independent ownership of that 40 percent of the pension. Therefore, the entire amount of the pension must be deducted. Kimmel, 1522-BH-93.

 

II. Lump Sum Payments

 

A. Defined
COMAR 09.32.02.14A(2) defines lump sum pension to mean the gross amount of a pension that is paid in one payment. Any pension paid in more than one payment is not a lump sum pension, even if the installments are paid irregularly. In light of this regulation, the claimant's "special payment" is not a separate lump sum pension payment, but is the first installment of a periodic pension. Williams v. Bethlehem Steel Corporation, 586-BH-93. NOTE: The subsequent Circuit Court decision affirmed this portion of the Board decision. The Court of Special Appeals also affirmed.

B. Paid Due to a Layoff or Shutdown
On January 9, 1990 the employer told all of its employees that it would permanently cease operations effective September 28, 1990. The claimant was scheduled to receive a lump sum pension in the amount of $282,105 on or about November 30, 1989. Under Section 8-1008, a lump sum payment of a pension, paid due to a layoff or shutdown of operations, shall not be deductible from unemployment insurance benefits. The claimant's lump sum payment is therefore not deductible. Bressler v. Maryland Metal Moulding Company, 123-BR-91.

C. Paid for Reasons Other Than a Layoff or Shutdown
The claimant received a lump sum pension in the amount of $41,113.86. This amount must be deducted from his weekly benefits. The fact that the claimant "held back $7,000 to pay for taxes" is irrelevant. Stitely v. R.W. Warner, Inc., 912-BR-89.

 

III. Base Period Employer
Pensions are deducted from unemployment benefits only where the pensions are received from a base period employer. Therefore, a claimant's pension amount will not be forever deductible from benefits due, since the claimant may, in future years, file a claim for benefits for which the "pension-giving" employer is not the base period employer. Tosches v. Baltimore City Department of Public Works, 1486-BR-82.