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September 12, 1961


Appeal, No. 456, Oct. T., 1960, by claimant, from decision of Unemployment Compensation Board of Review, No. B-59073, in re claim of Harry N. Yeager. Decision affirmed.


Harry N. Yeager, appellant, in propria persona.

Sydney Reuben, Assistant Attorney General, with him Anne X. Alpern, Attorney General, for Unemployment Compensation Board of Review, appellee.

H. Barton Off, with him Harry Rosenblum and Roy W. Johns, for intervenor, appellee.

Before Rhodes, P.j., Ervin, Wright, Woodside, Watkins, Montgomery, and Flood, JJ.

Author: Woodside

[ 196 Pa. Super. Page 164]


This case involves the amount of unemployment compensation due a claimant who is unemployed because he was involuntarily retired in accordance with his employer's policy.

Harry N. Yeager, the claimant, was employed by The Atlantic Refinding Co. for 41 years until August 19, 1959, when he was retired because he had attained the age of 65. Immediately prior to his retirement, he had been receiving wages of $140.40 a week.

The claimant had been a member of the Employes' Retirement System of the Atlantic Refining Company since its formation in 1927. Upon retirement, he chose an option which provides him a pension for life payable in the amount of $266.89 monthly. The claimant's monthly pension checks are drawn on an account to which both he and his base year employer contributed. The weekly pension, calculated from the monthly payments according to the statutory formula, was found by the board to be $61.

After the claimant's retirement, he applied for and received unemployment compensation in an amount over which there was no dispute until after January 1, 1960, the effective date of an amendment to the Unemployment Compensation Law which was applied by the

[ 196 Pa. Super. Page 165]

    bureau to the claims made by Yeager for the weeks following that date.

The amendment was made to section 404(d) by the Act of December 17, 1959, P.L. 1893, 1911, 1912. Section 404(d), supra, 43 P.S. § 804(d), with the language added by the 1959 amendment in italics, now reads as follows: "(d) Notwithstanding any other provisions of this section, each eligible employe who is unemployed with respect to any week ending subsequent to the First day of January, one thousand nine hundred sixty, shall be paid with respect to such week compensation in an amount equal to his weekly benefit rate less the total of (1) that part of the remuneration, if any, paid or payable to him with respect to such week which is in excess of his partial benefit credit, and also (2) that part of a retirement pension or annuity, if any, received by him under a private pension plan to which a base-year employer of such employer has contributed which is in excess of the maximum weekly benefit rate provided for in this act. If such retirement pension or annuity payments deductible under the provisions of this subsection are received on other than a weekly basis, the amount thereof shall be allocated and prorated in accordance with the rules and regulations of the department. Retirement pension or annuity payments received by the employe under the Federal OASI program, the Federal Railroad Retirement program or under any private retirement plan to which the employe was the sole contributor, shall not be considered a deductible retirement pension or annuity payment for the purposes of this subsection. Such compensation, if not a multiple of one dollar ($1.00), shall be computed to the next higher multiple of one dollar ($1.00)."

Applying the above provision, the bureau, the referee and the board each held the claimant to be entitled to benefits in the amount of $12 per week. The board explained the calculation as follows:

[ 196 Pa. Super. Page 166]

"The maximum weekly benefit rate of $38.00 provided for in the Act when deducted from the claimant's weekly pension in accordance with the aforesaid formula leaves a balance of $23.00. Further following the mandate of Section 404(d) of the Law the said sum of $23.00 must be deducted from the claimant's established weekly benefit rate of $35.00. Continuing to follow the aforesaid formula, the sum of $23.00 when deducted from the claimant's weekly benefit rate of $35.00 leaves a balance of $12.00. Therefore, under the provisions of Section 404(d) of the Law, the claimant is entitled to a weekly benefit amount of $12.00."

The claimant appealed from board's decision contending that there was error in the board's findings three and four which were as follows: "3. The claimant was receiving pension from his base year employer in the amount of $266.89 per month. 4. The claimant's pension payments are made from a fund to which both he and his base year employer contributed."

Finding number three is not accurately stated in that the claimant is not receiving his pension directly from the employer but from a private pension plan which is associated with The Atlantic Refining Company, and to which the company contributes. The employer and the pension system are different entities, but that is not important here. The evidence supports the finding that the pension payments, which the claimant is receiving, are made from a fund to which both he and his base year employer contributed.

The claimant argues that the $266.89 which he is now receiving is merely a return of his own money, and therefore, his employer made no contribution to the pension which he received during the weeks in question. During the time of his employment, Yeager paid into the retirement plan $5,851.98, which, by adding interest on his balance compounded annually to the time of retirement, equaled the sum of $9,504.44. The claimant

[ 196 Pa. Super. Page 167]

    argues that until he receives this sum from the system through his monthly installments, his employer has not contributed to his retirement.

We all agree that his position is untenable. He relies upon the Internal Revenue Code of 1954, § 72(d) whereunder, in circumstances such as exist here, no income tax need be paid upon the retirement allowance received during the first three years until the payments received by the retired employe total the full amount contributed by him. This provision of the Revenue Act is applicable only when the aggregate amount receivable by the employe in the first three years is equal to or greater than the amount contributed by the employe. It does not mean that the payments received by the appellant constitute a return of his own funds until the sum which he contributed is exhausted. It is an arbitrary exception to 72(b) of the Internal Revenue Code which establishes a formula based upon the taxpayer's contribution to the fund from which the pension is paid.

Upon the death of retirer, his beneficiary or estate would be paid a sum obtained by subtracting the aggregate of all retirement allowances paid to the date of death from his total contribution with interest to the date of retirement. This provision was added to the system January 1, 1952, and appears to constitute an additional liability of the employer, inasmuch as the claimant's monthly allowance does not appear to be actuarially reduced to provide the necessary money for the additional liability placed upon the total retirement fund. The appellant argues that this provision supports his position that all of the allowance which he is now receiving constitutes the return of his own money. This provision does not ...

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