Court: AL State Law Strikes Dual Pension, Unemployment Benefits

October 1, 2003 ( - Alabama state law does not entitle defined benefit plan participants of a bankrupt company to draw unemployment and Pension Benefit Guaranty Corporation (PBGC) payouts simultaneously.

>Under Alabama Code Section 25-4-78, plan participants are disqualified from receiving unemployment compensation if they are receiving a pension from a plan “maintained” by a base period employer.   In this case, the pension plan continued to be maintained by the bankrupt company even though plan assets had since been insured by the PBGC, the Alabama Court of Civil Appeals determined.

>With the ruling, the civil appeals court rejected the plaintiffs’ contentions that the pension plan was not “maintained” because the bankrupt company had ceased its contributions to the plan.   Judge Sharon Gilbert Yates, writing for the court, made the determination based on an interpretation of “maintain” to encompass more than just making contributions to a pension plan.

>Additionally, Yates found that to allow the former plan participants to draw both unemployment and a PBGC payment would “defeat Congress’s intent of preventing an employee who is receiving retirement benefits from his or her employer from also receiving unemployment-compensation benefits from the unemployment compensation fund into which the employer paid unemployment-compensation premiums.”

Case History

>Scottsboro Aluminum LLC purchased all the interests of Norandal USA, Inc. in February 1999, which included the workplace of plaintiffs Bobby Millican, Alvin Biddle, and Jack Anderson and the participants’ pension plan established by Norandal. Scottsboro continued under a collective bargaining agreement Norandal had with the local union of the United Steelworkers of America and when the original agreement expired, Scottsboro entered into a new agreement that increased the benefits under the plan.

>In 2001, Scottsboro filed for bankruptcy and per the proceedings the PBGC was appointed trustee of the pension plan. The participants began receiving pension benefits from PBGC because of their involuntary retirement at the same time the participants applied for unemployment compensation benefits from Scottsboro under Alabama’s Unemployment Compensation Act.

>The compensation referee determined they were disqualified from such benefits under Alabama law because Scottsboro “maintained” a pension plan from which the participants were receiving benefits.   The civil appeals court concurred.

The case isMillican v. McKinney,Alabama Civil Appeals Court, Number 2020530.