Unemployment Insurance and Pension/Defined Contribution/Annuity Account Distributions
We are advised of the following per the Indiana Department of Workforce Development:
A pension/defined contribution/annuity account distribution is deductible for unemployment insurance (UI) purposes when the employer contributes and the person is receiving it in a week in which they are also claiming UI. The rules stems from the idea that an employer should not both be paying UI and other compensation. Essentially, it was set up to protect employers from paying twice.
Unlike a lot of other areas, federal law actually requires the Department of Workforce Development (DWD) to deduct such distributions in cases where a base-period employer has funded 100% of the pension. Indiana goes further, requiring a deduction if a base-period employer has funded any of the pension/defined contribution/annuity account.
This is an area where DWD is still working to figure out its flexibility under federal law.
DWD is required to deduct wages, sick pay, and some pension/defined contribution/annuity accounts (as described above). As an aside, DWD does not deduct bonuses and supplemental unemployment benefit (SUB) pay.
For Guidance for your Legal Counsels and Accountants, please see the following:
For Federal Guidance, See:
Indiana Code (http://iga.in.gov/legislative/laws/2019/ic/titles/022/#22-4-15-4)
IC 22-4-15-4 Retirement; annuities; Social Security
Sec. 4. (a) An individual shall be ineligible for waiting period or benefit rights for any week with respect to which the individual receives, is receiving, or has received payments equal to or exceeding the individual's weekly benefit amount in the form of:
(1) deductible income as defined and applied in IC 22-4-5-1 and IC 22-4-5-2; or
(2) any pension, retirement or annuity payments, under any plan of an employer whereby the employer contributes a portion or all of the money. The following apply to a disqualification under this subdivision:
(A) The disqualification shall apply only if some or all of the benefits otherwise payable:
(i) are chargeable to the experience or reimbursable account of such employer; or
(ii) would have been chargeable except for the application of this chapter.
(B) Notwithstanding clause (A), the disqualification does not apply to a distribution from a pension, retirement, or annuity plan of an employer when an individual uses the distribution to satisfy a severe financial hardship resulting from an unforeseeable emergency that is the result of events beyond the individual's control.
(C) Federal old age, survivors, and disability insurance benefits are not considered payments under a plan of an employer whereby the employer maintains the plan or contributes a portion or all of the money to the extent required by federal law.
(b) If the payments described in subsection (a) are less than an individual's weekly benefit amount an otherwise eligible individual shall not be ineligible and shall be entitled to receive for such week benefits reduced by the amount of such payments.
(c) This section does not preclude an individual from delaying a claim to pension, retirement, or annuity payments until the individual has received the benefits to which the individual would otherwise be eligible under this chapter. Weekly benefits received before the date the individual elects to retire shall not be reduced by any pension, retirement, or annuity payments received on or after the date the individual elects to retire.