Social Security Unemployment Offset Repeal

Bills:

  • House Bill 96 – Representative May (44 co-sponsors as of 8/17/11)
  • Senate Bill 144 – Senator Steans(18 co-sponsors as of 8/17/11)

Issue: Illinois’ unemployment insurance law classifies one-half of older adults’ Social Security as disqualifying income.

Example: An older worker loses his or her job through no fault of their own. If their Social Security income is $300 per week, their unemployment benefit would be reduced by $150 weekly or $600+ each month. The loss of $600+ per month is extremely detrimental to older workers with Social Security as their only other significant source of income.

Problem: Over 17,600 jobless Illinoisans suffer age discrimination through denied or reduced unemployment benefits simply because they have reached the age 62 or older and are receiving Social Security benefits to which they are entitled.

Illinois is one of only two states in the nation (along with Louisiana) that has not taken repeal action on this offset rule that was originally established via a federal law. This means that older workers in each of Illinois’ surrounding states are able to collect their full unemployment benefit. Furthermore, at least 20 state jurisdictions have repealed this law since the beginning of this past decade, including Utah and Puerto Rico in 2010.

Especially in the current economy, older individuals struggle to afford basic necessities such as food, health care, housing, or utilities. Most older workers have continued to work because they cannot afford to retire. Many have willingly gone back to work because of pressing financial needs, partly due to the fact that Social Security benefits are decidedly not enough to live on. When they lose their jobs through no fault of their own, a significant portion or in some cases all of their unemployment benefits, which have already been fully paid by their employers, are being held from them.

Due to trends toward significantly reduced retirement savings and continued deterioration of access to traditional pensions, in addition to the lack of a Social Security COLA each of the last two years, more and more seniors must continue to work. Further exacerbating the problem, when older adults lose their jobs, it takes them nearly twice as long,on average,to find new ones.

Year after year, dozens of legislators from both sides of the aisle have tried to repeal this law, only to see these efforts blocked by the agreed bill process. There is overwhelming bi-partisan support in the General Assembly to pass this law as is evidenced by the 30+ co-sponsors currently signed on to House Bill 96. This bill is a top priority for AARP Illinois and is also supported by the Sargent Shriver Center on Poverty Law, the Woodstock Institute, and the Mobile Homeowners Association of Illinois.

History of the law: In 1974, a New York study had found that 11% of unemployment compensation claimants received retirement income while on unemployment compensation. This sizable overlap raised the question of whether these claimants were actually ready and available for work as required. It was alleged that some retirees were using unemployment compensation as a part-year supplement to their retirement income, and it was argued that this was an inappropriate use of the payroll taxes paid by employers to help their temporarily jobless workers.²

The Unemployment Compensation Amendments of 1976 (Public Law 94-566) required all States to reduce an individual’s unemployment compensation by the amount of any government or private pension or retirement pay received by the individual, effective October 1, 1979. This effective date was delayed to April 1, 1980 by the Emergency Unemployment Compensation Extension Act of 1977 (Public Law 95-19). The law was amended again before taking effect by the Multiemployer Pension Plan Amendments Act of 1980 (Public Law 96-364), and it modified this offset requirement.²

Until 1976, federal law did not require states to take any particular position regarding reducing state unemployment benefits due to the receipt of pension or retirement income. At that time, media reports inflamed Congress and resulted in the adoption of a federal requirement that states offset certain retirement payments from unemployment benefits.¹

Since state unemployment payroll taxes are “experience rated,” former employers of retirees that are “base period” or “chargeable” employers are perceived as suffering a “double dip” by paying both pension benefits and unemployment benefits to former employees. This was the seeming problem that Congress focused upon in passing the federal pension offset provision.¹

Under Paragraph B of Section 3304(a)(15), states have authority to reduce or eliminate Social Security offsets by “taking into account” the employee’s contribution toward Social Security retirement. The U.S. Department of Labor interpreted the federal pension offset law at the outset as covering Social Security and Railroad Retirement benefits as well as private and other governmental pensions.¹ In effect, the Labor Department’s interpretation argued that every employer’s FICA contributions made them a “base period” employer for purposes of offsetting Social Security retirement benefits from unemployment benefits. The practical result of this administrative reading of the statute was that retired individuals laid off after they began drawing their Social Security retirement benefits had their unemployment benefits offset against those payments.¹

Many states soon sought to use their option under Paragraph B of the federal law to “take into account” employee contributions toward Social Security or other retirement benefits by reducing or eliminating the offset.¹

50state jurisdictions now take advantage of their option under Paragraph B to exclude consideration of Social Security retirement benefits when paying unemployment benefits because they “take into account” the employee contribution by not offsetting any of the Social Security benefit.¹ South Dakota repealed the Social Security offset but set a minimum threshold which their unemployment fund must reach before older workers on Social Security are able to collect full unemployment benefits. Virginia also had a threshold going into 2011, but their legislature unanimously approved a bill to remove the threshold and completely eliminate the Social Security offset. The Virginia Governor signed the bill to completely eliminate the Social Security offset in March 2011.

History of the bill in Illinois: See the attached Addendum

Testimonials: Here are a few stories written by current victims of the law.

  • I am speaking not only as a senior unemployed citizen but as an unemployed citizen. I feel this law is age discrimination. Our former employers paid the same unemployment insurance for us as for any other employee, and in this economy or most any other time, our chance of finding another job is diminished. I believe that all of us, 62 and over, were planning to work longer and now we have come to the end of the road.

I have been trying to sell my house for 8 months because the mortgage is too high for me to pay on retirement income. Therefore my plan was to continue to work until it was sold. I have been planning to move out of state to share a home with a friend at a lot lower cost. In addition I am upside down in equity so I am looking into the other options without going through foreclosure.

With the difficult housing market and the loss of my job plus the unexpected decreased amount in the unemployment benefit it is very scary. My job was in a very specialized medical field and it is very difficult to find another job. There are a lot of other people in my field from the place that I worked that have been laid off who are also looking for jobs in this area. Much of it is related to new technology so any future in this is diminished.

I also have a 36 year old son with a learning disability living with me who has only been working part time at minimum wage. He has a college education but certain aspects of this learning disability make it difficult for him to find and keep a job. We find it difficult to get services for him too. I probably will have to help him all my life.

Although I am 66 years of age, seniors citizens as 62 to 65 years who were waiting to reach 66 to receive Social Security, have had to apply for it earlier at a reduced amount because of job loss. To add to this, they still receive only about 1/3 of their unemployment benefit which makes it even harder for them to pay living expenses and to survive. The fact is that we have a lot harder time finding jobs. With Louisiana and Illinois being the only two states to have this law, it seems more unfair. In my case, I was to receive $388 weekly but only receive $125 weekly which is even less than 1/3 of the original benefit. I hope you will give us your support and I thank you for your consideration. (Carol, Elgin, IL)

  • IDES has deducted $120 per week off of my IDES Benefits Since I started my Social Security. This is over $480 per month in some months. My wife and I have had to borrow from friends and family, and we have taken out 3 loans since I have had offsetting started in order to pay for food, medicines and our monthly utilities. This has been embarrassing to us. A lady at the IDES office once told me that she wished they didn't have an offsetting rule; it was "a pain in the back" for them to deal with too! I can't find work. Everyone I have contacted is either not hiring, going out of business or whatever. I feel the offsetting has been discriminating. I have worked many years for my Social Security benefits,and just because I am on unemployment at the same time, they (Illinois) wish to punish me because I signed up and got SS started to help make ends meet. NOT FAIR!

I signed up for Social Security early because of the lack of jobs. I don’t feel Illinois citizens should be penalized because they sign up for Social Security (I have worked and paid in on this too!). All the other states have abolished the rule of offsetting. I ask that you do the same – for your citizens’ well-being. (Walt, Cave in Rock, IL)

  • I have worked full time consistently for over 30 years. I have paid taxes to the federal government, the State of Illinois, Social Security and my Illinois Department of Employment Insurance was paid and in good standing. Now when I most need the unemployment benefits, I am being penalized for collecting Social Security.

I am still very actively seeking employment and have been fortunate enough to have several interviews. One interviewer disclosed there were 700 resumes received for a single position. This is challenging, but I am not deterred. I expect to work and to continue working, but until I am able to secure a position, I would be most appreciative if I could rightfully collect the full amount of my unemployment benefits.

There are 48 other states allowing its residents on Social Security to collect the full benefit amount of unemployment, if entitled. I find it astounding that Illinois has decided its senior citizens are not entitled to unemployment insurance even though they have dutifully worked and contributed.

I am not requesting a gratuity. I am requesting my full benefit amount of unemployment insurance until I can locate another position. I am not attempting to take advantage of the system. I very simply need the full $388 per week I feel I am entitled to collect. I have a mortgage on my condominium; I must continue to pay the fees to the condominium association, property taxes, utilities, insurance on home, car, life and supplemental medical and dental insurance. I do not live extravagantly, and the loss of income greatly impacts my life. The loss of my full unemployment benefit amount is not insignificant to me. I absolutely need the full $388 per week, not an abbreviated amount allotted to me because I am a senior citizen. (Judith, Chicago, IL)

Summary: Repealing the Social Security unemployment offset law will end the age and economic discrimination endured by the sufferers of this law and will bring Illinois in line with nearly every other state in the nation, including every single state along Illinois’ borders.

More than 17,100 older workers in Illinois will have the opportunity to collect their fair share of unemployment benefits. These are benefits that have already been paid into the system that will help them pay for basic necessities such as food, drugs, housing and health care. It is fair to say that the vast majority of the money they receive will quickly return into the economy to pay for those expenses.

As you have read in the testimonials above, the majority of the individuals struggling with the discriminatory effects of this law are working because they must. Social Security benefits alone are not enough to cover their ever-rising expenses. These are individuals who have paid into the Social Security system throughout a lifetime of work and whose employers have fully paid into the unemployment fund.

As stated previously, there is overwhelming bi-partisan support in the General Assembly to pass this law as is evidenced by the 30+ co-sponsors currently signed on to House Bill 96. This bill is a top priority for AARP Illinois and is also supported by the Sargent Shriver Center on Poverty Law, the Woodstock Institute, Citizen Action Illinois, the Illinois Alliance for Retired Americans and the Mobile Homeowners Association of Illinois.

Passing this law is the fair and moral thing to do. For all of these reasons, this bill must be allowed to move through Illinois’ legislative process.

Endnotes:

¹ National Employment Law Project, “Unemployment Insurance and Social Security Retirement Offsets” (December 2003), McHugh, Rick.

² Franco, Celinda. “Unemployment Benefits Reduced by Pensions and Social Security: A Fact Sheet” (January 2004). Federal Publications. Paper 216

Addendum:History of Social Security Unemployment Bill Introduction in Illinois

Year / Bill(s) / Sponsor(s)
2011 / HB 96*
HB 1115
SB 144 / Representative May
Representative Mathias
Senator Steans
2010 / HB 5047**
HB 4705
HB 4730
SB 2640*** / Representative May
Representative Stephens
Representative Mathias
Senator Steans
2009 / HB 293 / Representative Mathias
2008 / HB 4749 / Representative Mathias
2007 / HB 284
HB 582
HB 902 / Representative Black
Representative Black
Representative Mathias
2006 / HB 4269 / Representative Mathias
2005 / HB 461
HB 2448 / Representative Black
Representative Mathias
2004 / HB 3392
HB 3798 / Representative Franks
Representative Holbrook
2003 / HB 82
HB 1509
HB 2961
SB 489 / Representative Black
Representative Franks
Representative Rita
Senate President Emil Jones
2002 / HB 6295
SB 2142 / Representative Dart
Senator Emil Jones

*32 co-sponsors as of 2/25/2011

**40 co-sponsors

***10 co-sponsors

The bill has never been allowed a vote in committee.

1