Unemployment Compensation / Other Considerations

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Other Considerations When Filing UC Claims

The unemployment compensation system is designed to ease the transition period from one job to another when a worker loses a job through “no fault of his/her own.” Workers and their employers pay taxes into the unemployment compensation system to support unemployment benefits

Pension Deductions

Government and other retirement pensions, retirement pay, and social security benefits which are a result of the claimant’s own wages, may be deductible from your UC award. Most other types of pensions which are based on disability rather than employment are not deductible.

If you collect Social Security your benefit amount will be reduced by 50% of the amount of Social Security you receive. For example, if you receive $900 a month in Social Security, your unemployment benefits will be reduced by $450 (50% of $900) per month.

Pensions are deductible from weekly UC benefit rates on a dollar-for-dollar basis if the pension was entirely contributed to by the employer. Fifty percent of the amount of the pension is deductible if you contributed any amount to the pension.

Examples of the most common deductible pensions where employers contributed to the pension are:
Social security old ageFederal Disability pensions
Social Security disabilityIRA and KEOGH plans
Private employer pension plansFederal Civil Service pension
State or local government pensionsRailroad retirement annuities
Examples of the most common non-deductible pensions are:
Black LungTemporary Disability Insurance
Social Security Survivors’ BenefitsWorkers Compensation
Service related VA disability pensionsWidow’s pensions

Vacation or Severance Pay

Vacation pay may be allocated only to an actual vacation period. If you receive vacation pay and you are in a temporary lay-off status, (that is, you have an expected date of recall in the near future, your vacation payment will be deducted in full from your weekly benefit.) However, if your lay-off or separation is permanent or indefinite, vacation payments will not be deducted from your weekly benefit rate.

If you received severance pay, and it exceeds 40 percent of Pennsylvania’s average annual wage*, it will be deducted from your unemployment benefits. The deductible portion of your severance pay is allocated to the weeks immediately following your separation based on your full-time weekly wage. Severance pay means one or more payments made by an employer to an employee on account of separation from the service of the employer.

*The average annual wage, for unemployment compensation purposes, is based on the most recent three fiscal years, or 36 months of data. For more information, go to http://www.paworkstats.state.pa.us/portal/server.pt/community/home/19890

Federal Taxation of Unemployment Benefits

Unemployment benefits are considered taxable income for Federal Income Tax purpose and are reported in the calendar year in which the benefits are paid, regardless of when the claim for benefits was filed. It is your responsibility to determine if you will owe tax on these benefits. If you determine that you will owe tax on these benefits, you can have the tax deducted from your benefit check by using Form 1040ES. If you are married you may want to increase a working spouse’s withholding to cover the additional tax.

For help in determining if you will owe tax, and how to make estimated tax payment call the IRS at 1-800- 829-1040.

Re-opening a Claim

Once you file an application for benefits, that claim is valid for fifty-two (52) weeks (or otherwise determined by your Notice of Financial Eligibility). If during that period you go off unemployment compensation and then return to sign up again, during the same 52-week period (you found temporary employment, for instance), you can simply re-open your old claim and receive the same weekly benefit.

Opening a New Claim After Your Benefit Year Ends

After the end of your benefit year (one year after you opened your claim) you may be able to open a new claim if during your benefit year you earned six times your weekly benefit rate. You must also have left your last job for good cause.
Example: If you receive $250/week from UC, you must earn 6 x $250 or $1500 in the year following the opening of your initial claim in order to be eligible for a new claim. These wages can be from non-covered employment, meaning work with no taxes taken out (house painting, cutting grass, etc.) You will have to document such wages.
You will also need wages of at least 16 weeks from two different quarters in your new base year in order to reopen your claim. However, at least two quarters were not counted when you applied for your original UC claim. This is because when you applied no wages were counted from the quarter you applied in and the quarter before it. These wages will often be enough to make you eligible for a new claim.

Partial Benefits

You may be paid partial benefits if your regular hours of work are reduced because of lack of work or you get a part-time job after you open your claim. You can earn up to 30% of your weekly benefit rate in a claim week without reducing your benefits. Anything over 30% will be deducted dollar for dollar from your unemployment benefits. This is your “Partial Benefit Rate” (PBR). Any amount over this 30% earned in any week will be deducted from your weekly benefit rate. Be sure to report all earnings for each week you are claiming UC, even if they are below the 30%, or your claim could be terminated and you could be forced to pay back the benefits you have received.

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