Koontz v. Ameritech Services, Inc.

Decision Date22 March 2000
Docket NumberDocket No. 208176.
Citation607 N.W.2d 395,239 Mich. App. 34
PartiesNancy KOONTZ, Plaintiff-Appellant, v. AMERITECH SERVICES, INC., Defendant-Appellee, and Department of Consumer & Industry Services, f/k/a Michigan Employment Security Commission, Appellee.
CourtCourt of Appeal of Michigan — District of US

David Davidson, Dearborn, for Nancy Koontz.

Albert Calille, Detroit, for Ameritech Services, Inc.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and Errol R. Dargin, Assistant Attorney General, for the Unemployment Agency.

Richard W. McHugh, Ann Arbor, and Daniel W. Sherrick and Phillip L. Gilliam, Detroit, for amicus curiae International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW).

Before McDONALD, P.J., and NEFF and SMOLENSKI, JJ.


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,1 plaintiff opted for the lump-sum distribution of $185,711.55, which Ameritech transferred directly into an IRA.

When plaintiff applied for unemployment benefits in August 1995, the Unemployment Agency2 (UA) issued a determination that plaintiff's unemployment benefits must be coordinated with her company-funded pension pursuant to the coordination provisions of the Michigan Employment Security Act (MESA), M.C.L. § 421.27(f)(5); MSA 17.529(f)(5). According to the UA determination, plaintiff's unemployment compensation would be reduced weekly by $243, the prorated weekly retirement benefit plaintiff would have received had she opted for a monthly retirement annuity upon her involuntary termination from Ameritech.

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.3 This Court reviews questions of law, including statutory interpretation, de novo; however, we ordinarily defer to the construction of a statute by the agency charged with its interpretation, unless the interpretation is clearly wrong. Faircloth v. Family Independence Agency, 232 Mich.App. 391, 406, 591 N.W.2d 314 (1998). We conclude that the board of review's interpretation of subsection 27(f) is clearly wrong, given the legislative intent underlying the statute and the provisions regarding coordination.


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:

For benefit years beginning before the conversion date prescribed in section 75, and notwithstanding any inconsistent provisions of this act, the weekly benefit rate of each individual who is receiving or will receive a "retirement benefit", as defined in subdivision (4), shall be adjusted as provided in subparagraphs (a), (b), and (c). However, an individual's extended benefit account and an individual's weekly extended benefit rate under section 64 shall be established without reduction under this subsection unless subdivision (5) is in effect. Except as otherwise provided in this subsection, all other provisions of this act continue to apply in connection with the benefit claims of those retired persons.

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:

If and to the extent that unemployment benefits payable under this act would be chargeable to an employer who has contributed to the financing of a retirement plan under which the claimant is receiving or will receive a retirement benefit yielding a pro rata weekly amount equal to or larger than the claimant's weekly benefit rate as otherwise established under this act, the claimant shall not receive unemployment benefits that would be chargeable to the employer under this act.

Subdivision 4 defines "retirement benefit" for purposes of subdivision 1:

(a) As used in this subdivision, "retirement benefit" means a benefit, annuity, or pension of any type ... that is:
(i) Provided as an incident of employment under an established retirement plan, policy, or agreement, including federal social security if subdivision (5) is in effect.
(ii) Payable to an individual because the individual has qualified on the basis of attained age, length of service, or disability, whether or not the individual retired or was retired from employment. Amounts paid to individuals in the course of liquidation of a private pension or retirement fund because of termination of the business or of a plant or department of the business of the employer involved shall not be considered to be retirement benefits.

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:4 Notwithstanding any other provision of this subsection, for any week that begins after March 31, 1980, and with respect to which an individual is receiving a governmental or other pension and claiming unemployment compensation, the weekly benefit amount payable to the individual for those weeks shall be reduced, but not below zero, by the entire prorated weekly amount of any governmental or other pension, retirement or retired pay, annuity, or any other similar payment that is based on any previous work of the individual. This 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, chapter 23 of subtitle C of the internal revenue code of 1986, 26 U.S.C. 3301 to 3311.


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).5 The referee reversed the UA determination, concluding that plaintiff's weekly benefit rate was not subject to reduction under subdivision 27(f)(5) or under f(1).6 The board of review reversed, in a split decision, finding that plaintiff's benefit rate was subject to reduction under subdivision 27(f)(1), and that subdivision 27(f)(5) applied only to extended benefits and, therefore, was inapplicable to plaintiff.7

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 Employees' Retirement System, 458 Mich. 326, 332, 582 N.W.2d 767 (1998). The primary goal of statutory construction is to ascertain and give effect to the intent of the Legislature. Frankenmuth Mut. Ins. Co. v. Marlette Homes, Inc., 456 Mich. 511, 515, 573 N.W.2d 611 (1998). The court should apply a reasonable construction to best accomplish the Legislature's purpose. Marquis v. Hartford Accident & Indemnity (After Remand), 444 Mich. 638, 644, 513 N.W.2d 799 (1994).


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 action8 to ensure Michigan conformed with federal law, which conditioned federal certification of a state's unemployment compensation laws on the state's adoption of a provision that

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

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5 cases
    • United States
    • Court of Appeal of Michigan — District of US
    • May 5, 2005
    ...will generally defer to the construction given a statute by the agency charged with its interpretation. Koontz v. Ameritech Services, Inc., 239 Mich.App. 34, 37, 607 N.W.2d 395 (1999), rev'd on other grounds 466 Mich. 304, 645 N.W.2d 34 This Court reviews de novo both declaratory rulings an......
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