GLEASON,
APPELLEE,
vs.
OHIO BUREAU OF EMPLOYMENT SERVICES,
UNEMPLOYMENT>
COMPENSATION BOARD OF REVIEW,
APPELLANT
No. 84-524
SUPREME COURT OF OHIO
478 N.E.2d 225, 17 Ohio St. 3d 107, 17 Ohio B. Rep. 256
May 22, 1985, Decided
APPEAL from the Court of Appeals for
Cuyahoga County.
HEADNOTE
Unemployment compensation -- Pension satisfying
requirements of Section 3304(a)(15)(A), Title 26, U.S. Code, may be
set off against unemployment compensation, when -- R.C.
4141.312.
SYLLABUS
In the absence of a state statute, when an individual's pension
satisfies the requirements of Section 3304(a)(15)(A), Title 26,
U.S. Code, the entire amount of the pension is set off against any
unemployment compensation due the claimant.
STATEMENT OF THE CASE
This appeal specifically involves R.C. 4141.312 and the pension
offset provision of the Federal Unemployment Tax Act of 1976>
(hereinafter "the Federal Act"), Section 3301 et
seq., Title 26, U.S. Code, as they relate to an
individual's receipt of unemployment compensation and disability
retirement benefits. The facts surrounding this case are not in
dispute.
Appellee, John E. Gleason, Jr., was employed by the state of
Ohio in the Department of Liquor Control as an enforcement agent.
His term of employment spanned over twenty-two years of service to
the state. During this period, appellee placed a portion of his
salary into the Public Employees Retirement System (hereinafter
"PERS") as mandated by R.C. 145.47. In October 1979 Gleason was
forced to resign from his position because he was no longer
physically able to perform the strenuous duties related to the
job.
Appellee subsequently applied to the Unemployment Compensation
Unit of the Ohio Bureau of Employment Services (hereinafter
"bureau") for unemployment compensation. The bureau awarded him
benefits in a decision rendered on May 20, 1980. Gleason also
applied for and received disability retirement benefits from the
PERS fund. As a result, appellee was receiving both unemployment
compensation and disability retirement benefits.
The Department of Liquor Control, upon a motion for
reconsideration, sought to terminate appellee's receipt of
unemployment compensation by alleging that his claim for disability
retirement benefits was inconsistent with the receipt of
unemployment compensation. The motion was ultimately denied by the
Court of Common Pleas of Cuyahoga County in a decision rendered on
July 27, 1981.
Thereafter, on November 27, 1981, appellee was informed by the
bureau that it was required under R.C. 4141.312 to deduct the
amount of his retirement benefits from the unemployment
compensation that he was receiving. The bureau further determined
that appellee received $ 1,752 in excess of his entitlement and
ordered him to submit that amount to it. Gleason appealed this
order to appellant herein, the Bureau of Employment Services,
Unemployment Compensation Board of Review (hereinafter "board"),
which upheld the bureau's ruling but decreased the amount owed to $
1,680.
Pursuant to R.C. 4141.28(O), appellee appealed the board's
decision to the court of common pleas. The board's ruling was
subsequently reversed on the basis that a reduction of unemployment
benefits is not required by the Federal Act. Upon yet further
review, the court of appeals affirmed the trial court.
The cause is now before this court pursuant to the allowance of
a motion to certify the record.
COUNSEL
Guy V. Bozza and Timothy G.
Paluf, for appellee.
Anthony J. Celebrezze, Jr., attorney
general, Howard M. Sanders, Douglas J. Haynes and
Dwight Tillery, for appellant.
JUDGES
HOLMES, J. SWEENEY, LOCHER, C. BROWN and WRIGHT, JJ., concur.
CELEBREZZE, C.J., dissents separately. DOUGLAS, J., dissents.
AUTHOR: HOLMES
OPINION
{*108} The sole issue presented is whether the application
of R.C. 4141.312 and the restrictions within the Federal Act would
reduce appellee's unemployment compensation by the amount of
disability retirement benefits that he received. The record before
us demonstrates that the benefits which appellee received from PERS
consisted of sums he paid into the fund as part of the payroll
deductions, and not those paid by his employer. The court of
appeals held that the portion of the pension fund representing an
employee's contribution cannot be offset against an award for
unemployment compensation. However, for the reason set forth below,
we must reverse the appellate court's ruling.
Before specifically addressing this issue, some background
information is beneficial. Unemployment insurance in this country
is the responsibility of both state and federal governments. Under
the Federal Act, employers must pay federal unemployment taxes on
wages while each state provides unemployment compensation to
eligible claimants in accordance with state law. If the laws of
each state comply with the minimum federal standards, employers
receive a credit against their federal tax liability. The state
also receives federal funding to cover the necessary costs of
administering the state program if it complies with the Federal Act
and the Social Security Act provision of Section 503(a), Title 42,
U.S. Code.
The Department of Labor informs the various state agencies of
the minimum federal standards by issuing Unemployment Insurance
Program Letters (hereinafter "UIPL"). Then each year the Secretary
of Labor evaluates the laws of all fifty states and certifies those
that are in compliance with the federal standards. In ascertaining
whether a state's unemployment compensation system is in
compliance, the Secretary of {*109} Labor principally
relies on the positions that he has taken in the interpretive
letters.
In 1976 certain members of Congress voiced concern over retirees
who were collecting unemployment benefits and had no intention of
returning to work.1 In an effort to alleviate this problem, Section
3304(a)(15), Title 26, U.S. Code, was enacted. However, Congress
soon recognized that this provision was ineffective in
distinguishing those who were genuinely retired and had no
intention of rejoining the work force, from those who, despite
having been forced into retirement, needed to gain additional
employment in order to meet their living expenses.
Thus, the Federal Act was amended by Section 414 of the
Multiemployer Pension Plan Amendments Act of 1980. Section
3304(a)(15) currently provides:
"(a) Requirements. -- The Secretary of Labor shall approve any
State law submitted to him, within 30 days of such submission,
which he finds provides that --
"* * *
"(15) the amount of compensation payable to an individual for
any week which begins after March 31, 1980, and which begins in a
period with respect to which such individual is receiving a
governmental or other pension, retirement or retired pay, annuity,
or any other similar periodic payment which is based on the
previous work of such individual shall be reduced
(but not below zero) by an amount equal to the amount of such
pension, retirement or retired pay, annuity, or other payment,
which is reasonably attributable to such week except that --
"(A) the requirements of this paragraph shall
apply to any pension, retirement or retired pay, annuity, or other
similar periodic payment only if --
"(i) such pension, retirement or retired pay, annuity, or
similar payment is under a plan maintained (or contributed to) by a
base period employer or chargeable employer (as determined under
applicable law), and
"(ii) in the case of such a payment not made under the Social
Security Act or the Railroad Retirement Act of 1974 (or the
corresponding provisions of prior law), services performed for such
employer by the individual after the beginning of the base period
(or remuneration for such services) affect eligibility for, or
increase the amount of, such pension, retirement or retired pay,
annuity, or similar payments, and
"(B) the State law may provide for limitations on the amount of
any such a reduction to take into account contributions made by the
individual for the pension, retirement or retired pay, annuity, or
other similar periodic payment[.]" (Emphasis added.)
Subsections (A)(i) and (A)(ii) specify the conditions under
which unemployment benefits are to be mandatorily reduced by either
pension plans or social security and railroad retirement benefits.
As to pensions, {*110} (A)(i) mandates offset of payments
made pursuant to a plan which the base period employer maintained
or contributed to; whereas, (A)(ii) imposes the additional
requirement that the pension increased or the worker gained
eligibility as a result of services performed during the base
period.2
It is without question that appellee's PERS benefits are within
the purview of clauses (i) and (ii) in subsection (A). Appellee's
base period employer, the state of Ohio, contributed to his PERS
pension fund, and the amount of his pension certainly increased as
a result of his employment during the base period. The focal point
of this appeal, however, surrounds subsection (B) and whether any
amount of appellee's contribution to the PERS fund may be
subtracted from that amount required to be set off against his
unemployment compensation benefits.
Subsection (B) clearly provides authority to the Ohio General
Assembly to eliminate or reduce the employee's contribution to the
pension fund in determining the amount of pension to be deducted
from any unemployment compensation. UIPL 7-81.3 However, the
General Assembly has not acted pursuant to such authority.
The relevant statute herein is R.C. 4141.312 which states in
pertinent part:
"Notwithstanding sections 4141.31 and 4141.311 of the Revised
Code, and to the extent that the following provisions are required
as a condition for full tax credit against the tax imposed by the
'Federal Unemployment Tax Act of 1976,' 84 Stat. 713, 26 U.S.C.
3301, then the following conditions shall apply:
"(A) The amount of benefits payable to a
claimant for any week with respect to which the claimant
is receiving a governmental or other pension * * * shall,
to the extent required by such federal act, be reduced by an amount
equal to the amount of the pension * * * which is
reasonably attributable to that week." (Emphasis added.)
The plain meaning of this provision requires a reduction in
unemployment compensation to the extent mandated by the Federal
Act. As stated above, the Federal Act clearly mandates the
reduction in the absence of a state statute. Therefore, we have no
alternative but to set off the entire {*111} amount of
appellee's PERS benefits against his unemployment compensation.
Accordingly, we hold that in the absence of a state statute,
when an individual's pension satisfies the requirements of Section
3304(a)(15)(A), Title 26, U.S. Code, the entire amount of the
pension is set off against any unemployment compensation due the
claimant.
The judgment of the court of appeals is reversed.
Judgment reversed.
DISPOSITION
Judgment
reversed.
DISSENT
CELEBREZZE, C.J., dissenting.
Subsequent to Ohio's adoption of R.C. 4141.312, Congress amended
Section 3304(a) in several respects. One pertinent change was the
addition of Section 3304(a)(15)(B) which "* * * exempts states from
this requirement to the extent that the state determines to take
into account an unemployment insurance compensation claimant's
contributions for the pension or retirement payment."
Watkins v.
. Cantrell (C.A.4, 1984), 736 F. 2d
933, 939. Under the amended federal statute, state
unemployment compensation programs are only required to offset that
portion of unemployment benefits equivalent to retirement payments
received by the claimant which is not attributable
to "* * * contributions made by the individual for the pension * *
*." Section 3304(a)(15)(B). While states are free to set broader
offset provisions than the minimum requirements imposed by the
Federal Act, there is no longer a federal mandate to offset the
return of a claimant's own money from the retirement plan.
Ohio's disability retirement program consists of the employee's
personal contribution and a pension portion broadly characterized
as the payments to be received by a retirant in excess of the
employee's contributions.4 It is uncontroverted that the disability
retirement payments made thus far to appellee by the Public
Employees Retirement System comprise sums which he previously
contributed to the plan. Likewise, it is uncontroverted that but
for appellant's "offset" position, appellee is otherwise eligible
for unemployment benefits.
Although states may impose offset provisions more stringent than
{*112} those required under the Federal Act, in my opinion
the Ohio General Assembly has chosen not to enact a statute which
exceeds federal minimum standards. R.C. 4141.312 plainly states
that the pension offset provisions enumerated therein apply only "*
* * to the extent required by such federal act * * *."5
Payment of unemployment benefits to appellee, so long as he is
receiving pension payments attributable to his
contribution, does not put Ohio in conflict with federal law. The
majority's denial of such benefits exceeds, rather than conforms
to, federal requirements. Such a result was clearly not intended by
the legislature when it enacted the pension offset provisions of
Ohio's unemployment compensation laws. Accordingly, I encourage the
members of Ohio's General Assembly to forthwith enact appropriate
legislation to correct today's ill-conceived holding, as it is now
in their hands to "* * * atone for the wrong this day done."6
OPINION FOOTNOTES
1 122 Cong. Rec. 33279-80 (1976), remarks of Senators Long and
Bartlett.
2 The "base period" is that period of employment during which
eligibility for unemployment compensation is accrued. See R.C.
4141.01(Q).
3 UIPL 7-81 was amended by the Department of Labor in UIPL 7-81
Change I. Section 5 of the amendment provided detailed rules with
mathematical formulae for determining the proportion of individual
contribution to the entire pension plan. This section specifically
limited state discretion and imposed an obligation on the state not
found in the Federal Act. Due to its nature, the directive has been
found to be substantive, not merely interpretative, and in
violation of the notice and comment provision of the Administrative
Procedure Act, Section 553, Title 5, U.S. Code.
Cabais v.
. Egger (C.A. D.C. 1982),
690 F. 2d 234; cf. Rivera v.
. Becerra (C.A.9, 1983), 714 F. 2d
887. Accordingly, in UIPL 7-81 Change II, the department's
position set forth in the original UIPL 7-81 was reinstated and
Change I was thereby revoked.
DISSENT FOOTNOTES
4 Ohio's disability retirement program is defined in R.C. 145.36
as consisting of "[a]n annuity having a reserve equal to the amount
of the retirant's accumulated contributions" (R.C. 145.36[A]), and
a "pension" which in essence is the total projected benefits less
the annuity (R.C. 145.36[B]).
5 The Ohio General Assembly provided in R.C. 4141.01 that
certain definitions are taken from corresponding federal Acts "as
amended." This is similar to provisions in Ohio's income tax laws
which refer to portions of the Internal Revenue Code "as now or
hereafter amended" in order to avoid the necessity of reenactment
of state laws each time Congress amends the federal Acts. R.C.
5747.01(H).
6 Plessy v.
. Ferguson (1896), 163 U.S.
537, 562, Harlan, J. dissenting.