Unemployment and 401K money

[tenswyf]

What is the name of your state? MI

My BIL is losing his job at the end of this month. He is 61 years old and would like to take some of the money from his 401K to pay ahead on their mortgage.

He says that a woman came from unemployment and said that if they do not roll over their 401K that they will not be able to collect unemployment.

That does not sound right to me. Is that possible?

Thank you. (PS I am posting this for my sister as they do not have internet access.)

 

[racer72]

Withdrawl of 401K funds is taxable income, unemployement is for those that do not have any income. He was given correct information.

 

[tenswyf]

Thank you for your reply. That is really bad news. Unemployment will not cover their monthly expenses. I was hoping they could pay ahead on the mortgage and then use unemployment for living expenses until he finds another job and my sister can get back to work.

My sister is 52. She is diabetic and has been out of work for a few months due to needing eye surgery. She has one procedure left and hopefully will be able to start working again before too long. She is a hair dresser and does not have any benefits at work. We have tried to seek info on some sort of disability for her, but there does not seem to be any.

Her husband is 61. The company he works for is going out of business at the end of this month. The area they live in is very depressed and there are not many job prospects. Their biggest fear is losing their health insurance, but there is no way they can pay for COBRA. Luckily they do not have any car payments or credit cards debt

Is there any help out there?

 

[pattytx]

What is the name of your state? MI

My BIL is losing his job at the end of this month. He is 61 years old and would like to take some of the money from his 401K to pay ahead on their mortgage.

He says that a woman came from unemployment and said that if they do not roll over their 401K that they will not be able to collect unemployment.

That does not sound right to me. Is that possible?

Thank you. (PS I am posting this for my sister as they do not have internet access.)

Doesn't sound right to me. Generally speaking, UI is only denied if the employee was discharged due to "willfull misconduct" (which a Reduction in Force certainly is not) and benefits are only partially-paid if the individual has some earned income (which 401K is not). The two are completely unrelated. I'd suggest he give the agency a call and ask to speak with a supervisor.

 

[cbg]

I think it's going to depend on the state, but in some states ANY form of income will mean that UI is at best delayed until the source of income is gone. I can see this going either way depending on state law.

 

[tenswyf]

All the answers I am getting from everywhere are inconclusive. I spoke with the HR Director at my old job in MI and he said he is 99% sure that a 401K dispersement should not be a factor in collecting unemployment. He said worst case scenerio is that my BIL would not be able to make a claim during the week that he receieves the dispersement money.

I have read the entire publication 1901 on Michigan.gov It address retirement pay, but says nothing about 401K money.

Thank you for taking the time to comment. I appreciate all the info I can get.

 

[justalayman]

I have a suspicion that although this is a one time withdrawal, Michigan will pro-rate it to be applied as a monthly dispersal would be. What that would mean is it could affect up to one month of UI.

The other info needed is;

was the 401k only your husbands contribution or did the employer match funds or a partial match of funds.

I believe the retirement pay section would be what you are looking for.

If the 410k was more than 1/2 up to totally self funded, it should not affect the UI.

If there were company contributions but less than 1/2 of the total contribution, then it would be applied against the weekly benefit amount using 1/2 of the dispersement as income.

If it was totally company funded, then the total amount would count against the UI benefit.

Note to pattytx: the UI would not be considered a denial. It would merely be an adjustment due to the income.

 

[cbg]

The only person whose opinion counts is that of the UI adjuster. Submit the claim and see what they say.

 

[tenswyf]

Thanks for your input, however we are trying to figure out the correct thing to do in advance.

 

[tenswyf]

My BIL contributed 10% of his pay and I think the company matched a couple of percent.

I will find out what the company matching is.

 

[cbg]

The company match will not affect whether a withdrawal does or does not affect UI benefits.

 

[justalayman]

The company match will not affect whether a withdrawal does or does not affect UI benefits.

if you read the literature from Michigan, the company match WILL affect UI benefits.

It does not specifically state it applies to a 401K but if you read it, it is obvious that that, and other shared contribution pension funds, are exactly what that section was written to address.

Mi specifically states exactly what I posted prior. That was from their publication concerning recieving pension benefits while collecting UI.

The only question I could not find a definitive answer to was how a one time disbursement would be treated. If receiving monthly payments, they treat pension bene's as I posted earlier. Being a one time disbursal, I don't know if they would apply this against only one week or if they would average it and apply it against an entire month.

tenswyf: call the UI office and ask them. Although whatever they say would not be binding and they have given incorrect info before, they would be closer to correct than anybody here guessing.

 

[cbg]

Sorry, justalayman, I missed part of your post.

Night work is starting to pile up on me, I guess.

 

[justalayman]

No need to apologize to me. I'm "justalayman" trying to toss out some info where I can.

You are generally spot on. Can't remember how many times I looked for your response to a query when I had no clue. I actually feel odd posting info contrary to you and pattytx.
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What has happened to our world. Everything is backwards. Maybe it's "Bizzarro world" (you won;t understand it unless you are a Superman comic book fan)

 

[pattytx]

You are generally spot on. Can't remember how many times I looked for your response to a query when I had no clue. I actually feel odd posting info contrary to you and pattytx.

Don't be. I'll admit I didn't do any research on this; just flying by the seat of my pants common sense. And just goes to show that common sense is not necessarily part of the law.

However, common sense also tells me that, based on what has been cited so far, only the disbursement relative to the company match and the interest earned (on both the company match and the employee contributions) would be considered, as the remainder is just a return of what the employee had deducted from his paychecks in the first place.