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Legalease
Legalease, Lawyer
Category: Employment Law
Satisfied Customers: 14511
Experience:  13 years experience in employment law, unions, contracts, workers comp law
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I was an employee in Delaware. My department was outsourced

Customer Question

I was an employee in Delaware. My department was outsourced to another company. I was given the option to transition to this company at my same salary for 2 months and then to be paid by that company's methods. Under their pay I would be making 1/2 of what I was making previously. I opted to be terminated and not to transition to this company. I filed for unemployment and was approved. When I applied I informed the representative at the unemployment office that I was collecting $2400 per month from a 403B TSA which I had contributed to while employed (I am over 59-1/2 so there is no penalty for withdrawal). She asked how much my employer had contributed to this plan. After giving her the numbers (my contribution $62,881 and my employers contribution $12,345), I was told that none of this was deductible and not to claim it. I'm beginning to second guess whether this is correct. I've already collected about $4000 in benefits and would hate to have to pay this back if I was given incorrect information. Also I was paid for accumulated vacation time. I did not claim this since the the instructions said to report income in the week it was made, not the week it was paid. Since I accumulated this vacation time before receiving benefits, I didn't feel this should be reported as income.

My questions are - Should I be claiming my 403B TSA withdrawals as income, and am I correct in not claiming the pay for vacation as it was earned before initiating my unemployment claim?
Submitted: 1 year ago.
Category: Employment Law
Expert:  Legalease replied 1 year ago.

Hello there.

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If you are currently receiving payouts from the 403B plan and that plan came from the employer who laid you off (so that contributions were made to the 403B plan and contributions were made to the state unemployment tax program on your behalf by the same employer) then you are required to report the receipt of these payments to the unemployment department because there is a reduction in benefits by a percentage of the portion of those payments that were paid by your former employer. (If the 403B plan, 401K plan had NO employer contributions or came from a company other than the company that laid you off then your unemployment benefits would not be affected at all -- the rule of law on this is that you cannot receive a pension from employer funds and unemployment at the same time if it came from the same employer). Regarding the vacation pay that you received -- you are still required to report this to the unemployment department because there is also a deduction taken for the number of weeks that the vacation pay represents when you left the job (the reasoning behind that one is that vacation pay is treated just like a few weeks of severance pay and deductions are made from the unemployment benefits for that time period just as if it were severance pay). I seem to be just a fountain of not so good news for you today and I am sorry to be the bearer of all of this negative news for you. However, you really want to get these matters straightened out as soon as possible and my suggestion is that you call or visit an unemployment office near you and ask to speak to a supervisor to sort all of these matters out. It could very well be that because the amount of the employer's contribution to the 403B was such a small portion of the overall amount that you contributed that when the calculations were made, it worked out to no deductions from your weekly unemployment amount -- but you should confirm that with a supervisor and get his/her name and keep a record of the date and time of the call or the meeting in the event that unemployment audits your claim next year when they have received all of the final numbers from your employer and these things come up at that time after all of the regular pay and vacation pay has been reported and the 403B payments have been reported (they are reported on a quarterly and semi-annually basis by your employer to the federal and state taxing authorities). You do not want to end up in a situation where you are required to pay back any of the money to the unemployment department because even though it may have been a mistake or two on your part, if the unemployment department charges you with an overpayment, they will charge you interest and penalties in the payback if they decide that the overpayment was your fault (you failed to report everything appropriately) -- so you want to have some records that you reported everything as you were supposed to do and if you do that, they can only ask for reimbursement of the overpayment amount without any interest or penalties attached (the penalties can be harsh -- my own husband was "fined" six weeks of his unemployment payments because he did not report part time income properly -- and those weeks were not even credited against what he owed to them -- the unemployment department stopped his payments at Christmas in 2010 for six weeks and then once they had taken those weeks from him, they then took every penny of his unemployment weekly checks until the overpayment was repaid to them -- leaving him without any income at all for nearly 5 months).

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I hope that helps.

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MARY

Legalease, Lawyer
Category: Employment Law
Satisfied Customers: 14511
Experience: 13 years experience in employment law, unions, contracts, workers comp law
Legalease and 11 other Employment Law Specialists are ready to help you
Customer: replied 1 year ago.

Is the information on vacation pay Delaware specific. On the AARP web site they say -- "Don't confuse severance pay with the payment of accrued vacation days at termination of employment. Federal and state laws require that all unused, accrued vacation time be paid out in cash upon termination. States vary in how they adjust unemployment benefits for accrued vacation pay. In general, your vacation payout will not affect the amount of unemployment compensation you receive."


 


I had over 350 hours vacation pay accrued which was paid after I initiated my unemployment application. At my hourly rate this would come to more than my maximum benefit for the benefit year of 26 weeks. It doesn't seem fair that someone who used their vacation while employed would qualify for unemployment, but somewhat who let it accrue would not.

Expert:  Legalease replied 1 year ago.

Hello again Shirl --

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I received your follow up question to the original question and just wanted to let you know that I have to go offline for the next few hours but I will pick it up and provide you with some answers as soon as I return to the Just Answer website. I thank you for your patience in this matter.

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MARY

Expert:  Legalease replied 1 year ago.

Hello again Shirl --

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I apologize for the delay in answering this for you -- I had some computer issues that were so bad I was offline for a few days having viruses cleaned out. Under these circumstances, you do have to report your vacation pay received to the unemployment compensation office and there is a deduction from your unemployment benefits for these amounts. It is treated like severance pay (you are not eligible for unemployment benefits for any week that you have received severance pay and it is the same with vacation pay -- I wish I could tell you something different here , but I cannot -- I have just spent more than an hour reviewing every legal website on these issues for DE and other states to try to find a happier solution here for you but I could not do so). You can get more information on DE employment laws in the attached document (if you scroll to Section 6 c you will see the requirement to report the vacation pay to unemployment -- http://www.lawforchange.org/images/lfc/DelawareEmployment.pdf

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MARY

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