If you decide to go back to work or continue working after you have started receiving pension benefits and you are laid off from your job, your unemployment benefits could be affected by your pension. As explained by Dori R. Perrucci in an article for The New York Times, this is because a provision in the Federal Unemployment Tax Act requires states to offset or reduce unemployment benefits against pensions that are funded in full by the employer. Since the states administer unemployment benefits, each state establishes the rules that apply.
The reduction of unemployment benefits would generally apply to annuity payments from an employer’s pension plan, but could potentially apply to lump sum payments, depending on state law. Rollovers of lump sum payouts would generally not be offset against unemployment benefits, but the states have the option. Social security and railroad retirement benefits are generally not deductible from unemployment benefits.
For example, in New Jersey, if your employer contributed the entire amount for your pension, your employment benefits would be reduced by 100% of the weekly amount of your pension. If both you and your employer contributed toward the pension, your unemployment benefits may be reduced by 50% of the pension benefit. And if you contributed the entire amount toward your pension, your unemployment benefits would not be reduced. If you were involuntarily separated from employment before reaching age 59 ½ and received a lump sum payment, your unemployment benefits would be reduced.
In New York, your weekly unemployment benefits may be reduced if you receive a pension from an employer for whom you worked in the last 18 months and that work made you eligible for a pension or increased the amount of the pension. If the employer contributed the full amount to the pension plan, your unemployment benefits would be reduced by the weekly amount of your pension. And if you contributed any amount to the pension plan, your unemployment benefits would be reduced by half the weekly amount of your pension.
In some states, for example Massachusetts, you need to report the source and amount of any pension benefits you are receiving when you apply for unemployment. The state will then make a determination as to whether your unemployment benefits will be reduced. The Texas Workforce Commission indicates that you will be mailed a written decision as to whether your pension benefits will be deducted from unemployment benefits. In Texas, pension and other retirement benefits are deductible if they are based on wages you earned from an employer during your base period.
If you have questions as to whether your unemployment benefits would be affected by a pension or other retirement benefits you are receiving, you should contact your state unemployment office. On the U.S. Department of Labor website, you can use the Service Locator to find links to the state unemployment offices.
Sources:
Benefits, Massachusetts Labor and Workforce Development
Dori R. Perrucci, Personal Business; When Pension and Unemployment Checks Don’t Mix, The New York Times
Pensions, State of New Jersey Department of Labor and Workforce Development
Service Locator, U.S. Department of Labor
Unemployment Insurance Benefits – Frequently Asked Questions: Before You File a Claim, New York State Department of Labor
Special Circumstances, Texas Workforce