Plaintiff appeals by leave granted an order of the circuit court affirming a Michigan Employment Security Board of Review decision that plaintiff's weekly unemployment benefit rate was subject to reduction as a result of a lump-sum pension distribution, which plaintiff directly rolled over into an Individual Retirement Account (IRA). We reverse.
Plaintiff was employed with defendant Ameritech Services, Inc., in its Traverse City office from 1965 to August 1995, when defendant permanently closed the office. Upon separation from employment, plaintiff had the option of electing either a monthly annuity or a lump-sum distribution of her company-funded pension. Because she was only forty-eight years old and not ready to retire,
When plaintiff applied for unemployment benefits in August 1995, the Unemployment Agency
Plaintiff requested a redetermination of her unemployment benefits, and the UA affirmed its decision. Plaintiff appealed the redetermination. Following a hearing, the referee determined that plaintiff's unemployment benefits were not subject to coordination with her lump-sum pension distribution because plaintiff had not "received" the payment as intended under the statutory language requiring coordination. Ameritech appealed to the Michigan Employment Security Board of Review, which issued a two-to-one decision reversing the referee's decision and again determining that plaintiff's unemployment benefits must be reduced in light of her pension rollover. Plaintiff appealed the decision to the circuit court, which affirmed the UA determination that coordination was required.
This case presents an issue of first impression: Whether subsection 27(f) of the MESA, M.C.L. § 421.27(f); MSA 17.529(f), requires that plaintiff's weekly unemployment compensation be coordinated with her lump-sum retirement benefit, which was directly rolled over into an IRA after her involuntary termination of employment due to Ameritech's office closure.
Subsection 27(f) of the MESA provides for the coordination of unemployment compensation and retirement benefits. For purposes of our analysis, we set forth the applicable statutory provisions. Subdivision 27(f)(1) provides generally:
Subparagraph a, which the board of review found applicable to plaintiff, sets forth the adjustment applicable if a claimant's retirement benefit is equal to or greater than the corresponding unemployment benefit rate:
Subdivision 4 defines "retirement benefit" for purposes of subdivision 1:
Subdivision 5 provides for a reduction in unemployment compensation where required by the Federal Unemployment Tax Act, 26 U.S.C. 3301 et seq. (FUTA) to ensure compliance with federal requirements related to unemployment insurance:
In this case, the statutory provisions for coordination under subdivision 27(f)(1) and subdivision 27(f)(5) have resulted in inconsistent interpretations and application of the MESA coordination provisions. In its initial determination, the UA denied plaintiff unemployment compensation benefits pursuant to subdivision 27(f)(5).
We disagree and find that subdivision 27(f)(5) governs the coordination of benefits in plaintiff's situation, and accordingly, plaintiff's weekly benefit rate is not subject to reduction. We also conclude that plaintiff's rolled-over retirement benefits do not result in a reduction of her benefit rate, even under the provisions of subdivision 27(f)(1).
If reasonable minds can differ with respect to the meaning of a statute, judicial construction is appropriate. Adrian School Dist. v. Michigan Public School
Given the legislative history of subsection 27(f) and the statutory language, we conclude that subdivision 27(f)(5), rather than subdivision 27(f)(1), governs whether plaintiff's unemployment compensation is subject to reduction. Subdivision 27(f)(5) was added to subsection 27(f) in 1980 in hurried legislative action
The federal law was enacted to create uniformity among the states with regard to the coordination of retirement benefits and unemployment compensation. Id. at 785, 336 N.W.2d 873; Hildebrand, Federal Law Requirements for the Federal-State Unemployment Compensation System: Interpretation and Application, 29 U. Mich. J. L. Ref. 527, 556 (1996). To comply with the federal law, the Legislature merely added the federally required provision to subsection 27(f), as subdivision 27(f)(5), which to a certain extent duplicated existing statutory provisions for coordination of retirement benefits under subdivision 27(f)(1). See House Legislative Analysis, HB 5632, April 23, 1980.
We conclude that subdivision 27(f)(5) is controlling with regard to the coordination of plaintiff's retirement benefits. Its purpose was to conform with the federal government's goal of maintaining certain uniformity among the state programs regarding the coordination requirements for unemployment compensation, which purpose would be defeated were Michigan to default to its own interpretations for coordination under its previous statutory provisions and, in this case, circumvent the clear result under subdivision 27(f)(5) that coordination of plaintiff's benefits is not required.
Moreover, the express statutory language mandates a conclusion that subdivision 27(f)(5) controls over subdivision 27(f)(1). Subdivision f(5) was enacted after f(1) and provides: "Notwithstanding any other provision of this subsection ..." (emphasis added). To apply subdivision 27(f)(1) independently of subdivision 27(f)(5) and deny plaintiff unemployment benefits is inconsistent with the result under federal law. Such an interpretation also creates an inconsistency within the statute, contrary to the rules of statutory construction. In construing statutes, seeming inconsistencies in the various provisions
Although the board of review concluded that subdivision 27(f)(5) applies only to extended benefits, and, therefore, does not apply to plaintiff, we find no basis in the statute for this conclusion. There is no limiting language in subsection 27(f) to indicate that subdivision 27(f)(5) applies only to extended benefits.
Subdivision 27(f)(5) expressly provides "[t]his reduction shall be made only if it is required as a condition for full tax credit against the tax imposed by the federal unemployment tax act [FUTA], chapter 23 of subtitle C of the internal revenue code of 1986, 26 U.S.C. 3301 to 3311." United States Department of Labor (USDOL) guidance for the FUTA provides that the FUTA does not require a reduction where pension benefits are rolled over into an IRA, as plaintiff did in this case.
Plaintiff was involuntarily terminated from her employment. She had no choice upon separation but to take her retirement funds accumulated in Ameritech's pension fund. She requested the funds be directly rolled over into an IRA, in a lump sum, because she was not ready to retire. Accordingly, plaintiff did not receive her retirement funds. Her weekly unemployment compensation is not subject to reduction under the FUTA, and subdivision 27(f)(5) applies to exempt plaintiff's pension benefit from coordination.
Even were we to find the coordination of plaintiff's benefits governed by subdivision 27(f)(1), we would be compelled to conclude that her benefits were not subject to coordination under the circumstances of this case.
The board of review concluded that a prorated amount of the funds plaintiff paid into the IRA must be offset against her weekly unemployment benefit rate pursuant to subparagraph 27(f)(1)(a) because plaintiff "received" her pension. We find this reading of the statute clearly wrong.
Under the express language of the statute, subdivision 27(f)(1) requires an offset of pension benefits if an individual "is receiving or will receive a `retirement benefit',
In this case, plaintiff's pension is not considered a retirement benefit for purposes of subdivision 27(f)(1) because it was liquidated upon plaintiff's involuntary termination when Ameritech closed its Traverse City office. Upon her separation from employment with Ameritech, plaintiff had no choice but to take the distribution of her retirement fund, as either a monthly or a lump-sum payment.
Even if plaintiff's distribution were considered a retirement benefit, i.e., disregarding the express language in subparagraph 27(f)(4)(a)(ii), we conclude that plaintiff's IRA fund would be exempt from coordination. Given the language of subparagraph 27(f)(4)(a)(ii), exempting from coordination retirement payments due to the closure of a business department, we conclude that the Legislature did not intend the terms "receive or will receive" under subdivision 27(f)(1) to include the direct rollover of a pension fund to an IRA by a worker forced into involuntary termination because of an office closure.
This construction of the statute is the most reasonable and comports with the benefit interpretations of both the UA and the USDOL. MESC Revised Benefit Interpretation No. 20.641 (November 29, 1995); USDOL Unemployment Insurance Program Letter No. 22-87, Change 1 (June 19, 1995). In reaching our conclusion, we are mindful that the role of the judiciary is not to engage in judicial legislation, but rather to determine the way chosen by the Legislature. Tyler v. Livonia Public Schools, 459 Mich. 382, 393, n. 10, 590 N.W.2d 560 (1999). We decline to interpret the statute to incorporate any change that overrides requirements clearly adopted by the Legislature.
On appeal, plaintiff further contends that she was denied her right to due process because the hearing notice on this matter mentioned only subdivision 27(f)(5); however, the referee and the board of review relied on subdivisions 27(f)(1) and (4) in rendering their decisions. Plaintiff claims that she was prejudiced by the lack of notice because she did not have the opportunity to prepare an argument with regard to these subdivisions. We find this contention without merit.
We concur with the reasoning of the circuit court regarding notice. The UA notice of determination expressly referenced subsection 27(f) of the MESA. The various subdivisions of subsection 27(f) were at issue throughout the proceedings below. Plaintiff had adequate notice that subsection 27(f), in general, was at issue in the determination of her entitlement to unemployment compensation benefits.