Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan
O pinion
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED JUNE 12, 2002
NANCY KOONTZ,
Plaintiff-Appellee,
v No. 116366
AMERITECH SERVICES, INC.,
Defendant-Appellant,
and
UNEMPLOYMENT AGENCY of the
MICHIGAN DEPARTMENT OF CONSUMER
AND INDUSTRY SERVICES, formerly
MICHIGAN EMPLOYMENT SECURITY
AGENCY,
Appellee.
_____________________________________
BEFORE THE ENTIRE BENCH (except MARKMAN, J.).
CORRIGAN, C.J.
This case requires that we interpret a statute directing
coordination of unemployment benefits with pension benefits.
Plaintiff received a lump-sum pension payment under an
employer-funded retirement plan. When plaintiff sought
unemployment compensation, the Unemployment Agency1
1
The Unemployment Agency was formerly known as the
Michigan Employment Security Commission.
coordinated her weekly benefits with her prorated weekly
amount of pension payments (i.e., the amount of pension
benefits plaintiff would have received weekly had she not
opted for a lump-sum payment). The ensuing reduction rendered
plaintiff ineligible to receive any unemployment benefits.
The Employment Security Board of Review and the circuit court
upheld the reduction. The Court of Appeals reversed and held
that coordination was not required.
We hold that the governing statute, MCL 421.27(f)(1),
mandates coordination of plaintiff’s unemployment benefits
with her pension benefits. We therefore reverse the judgment
of the Court of Appeals and reinstate the decision of the
Board of Review and the judgment of the circuit court.
I. Underlying Facts and Procedural History
Plaintiff began working for Ameritech in its Traverse
City office in 1965. Thirty years later, Ameritech closed its
Traverse City office and offered to continue plaintiff’s
employment in another office. She declined, electing instead
to retire. Ameritech’s retirement incentive program entitled
plaintiff to a $1,052.95 monthly pension allowance, which
Ameritech fully funded. In lieu of monthly payments, however,
plaintiff elected to receive her pension in a lump-sum in the
amount of $185,711.55. Plaintiff also chose to transfer the
lump-sum directly into her individual retirement account
(IRA).
Plaintiff then applied for unemployment compensation.
Ameritech argued in response to plaintiff’s application that
MCL 421.27(f) of the Michigan Employment Security Act, MCL
2
421.1 et seq., allowed coordination of plaintiff’s
unemployment benefits with the amount of pension payments
plaintiff would have received if she had elected the monthly
payment option. The Unemployment Agency agreed and directed
coordination under MCL 421.27(f). This coordination resulted
in a reduction in plaintiff’s unemployment benefits in the
amount of $243 weekly, rendering her ineligible to receive any
unemployment benefits.2 Plaintiff timely protested this
determination, but the Unemployment Agency upheld its decision
on redetermination.
Plaintiff thereafter appealed the redetermination. A
referee reversed the decision of the Unemployment Agency on
the ground that neither MCL 421.27(f)(1) nor (5) required
coordination since plaintiff had transferred the pension funds
directly into her IRA and thus had not “received” the funds
within the meaning of the act. The referee relied on the
Unemployment Agency’s Revised Benefit Interpretation No.
20.641, which indicates that an employee who rolls a pension
amount over into an IRA does not incur immediate income tax
liability because the Internal Revenue Service does not
consider the payment “received” for income tax purposes.
Ameritech appealed the referee’s decision to the Michigan
Employment Security Board of Review, which reinstated the
Unemployment Agency’s determination in a split decision. The
Board of Review ruled that the taxability of plaintiff’s
2
Because plaintiff’s pro-rata retirement benefits would
have been equal to or greater than her weekly unemployment
benefits, she was not eligible to receive unemployment
benefits chargeable to Ameritech. See MCL 421.27(f)(1)(a).
3
pension benefit did not affect the operation of MCL 421.27(f)
and that the lump-sum distribution was a “retirement benefit”
under the plain language of the act. Accordingly, the board
concluded that coordination was required under MCL
421.27(f)(1)(a).
One member of the Board of Review dissented, finding that
plaintiff did not receive a retirement benefit because the
lump-sum distribution had been rolled over into an IRA. The
dissenting member relied on Revised Benefit Interpretation No.
20.641 and the United States Department of Labor’s (USDOL)
Unemployment Insurance Program Letter No. 22-97. The USDOL
Letter No. 22-97 stated that pension amounts rolled over into
an IRA within sixty days of receipt are not gross income for
purposes of federal income taxation and thus are not
“received” for purposes of 26 USC 3304(a)(15)(A) of the
Federal Unemployment Tax Act (FUTA), 26 USC 3301 et seq.3 The
dissenting member concluded that MCL 421.27(f) did not require
coordination of plaintiff’s weekly benefit amount.
The circuit court affirmed the Board of Review’s
decision. The Court of Appeals then granted leave to appeal4
and reversed the circuit court order. 239 Mich App 34; 607
NW2d 395 (1999). It held that another subsection, MCL
421.27(f)(5), governed and did not require coordination of
benefits. Alternatively, the court stated in dictum that even
3
The Unemployment Agency issued Revised Benefit
Interpretation No. 20.641 on November 29, 1995, in an apparent
attempt to comply with USDOL Letter No. 22-87.
4
Unpublished order, entered July 7, 1998 (Docket No.
208176).
4
if MCL 421.27(f)(1) applied, coordination was not required
because 1) plaintiff had not received a “retirement benefit”
within the meaning of MCL 421.27(f)(4), and 2) the phrase
“receive or will receive” in MCL 421.27(f)(1) does not include
the direct rollover of a pension fund to an IRA.
II. Standard of Review
This case requires us to ascertain the meaning and proper
application of MCL 421.27. Issues of statutory interpretation
are questions of law that we review de novo. Oade v Jackson
Nat’l Life Ins Co, 465 Mich 244, 250; 632 NW2d 126 (2001);
Donajkowski v Alpena Power Co, 460 Mich 243, 248; 596 NW2d 574
(1999).
III. Relevant Statutes
MCL 421.27(f)(1) has existed in essentially the same form
since 1954 PA 197. It states:
[N]otwithstanding any inconsistent provisions
of this act, the weekly benefit rate of each
individual who is receiving or will receive a
“retirement benefit,” as defined in [MCL
421.27(f)(4)], shall be adjusted as provided in
subparagraphs (a) . . . . However, an individual's
extended benefit account and an individual's weekly
extended benefit rate under [MCL 421.64] shall be
established without reduction under this subsection
unless [MCL 421.27(f)(5)] is in effect . . . .
(a) If and to the extent that unemployment
benefits payable under this act would be chargeable
to an employer who has contributed to the financing
of a retirement plan under which the claimant is
receiving or will receive a retirement benefit
yielding a pro rata weekly amount equal to or
larger than the claimant's weekly benefit rate as
otherwise established under this act, the claimant
shall not receive unemployment benefits that would
be chargeable to the employer under this act.
MCL 421.27(f)(1) thus requires an offset in unemployment
compensation for retirement benefits if the employer charged
5
with unemployment benefits funded the retirement plan. This
type of reduction is known as “narrow coordination.”
Before 1980, federal law did not address coordination of
unemployment and retirement benefits. In March 1980, Congress
amended 26 USC 3304(a)(15) of the FUTA to require the
coordination of unemployment benefits with employer-funded
retirement benefits, regardless of whether the employer who
had funded the retirement benefits was the same employer whose
account would be charged for the unemployment benefits. This
type of coordination is known as “broad coordination.”
Section 3304, particularly subsection (a)(15), of the FUTA
requires the states to conform to federal policy regarding
coordination of unemployment benefits to insure eligibility
for federal funds or tax credits. See Gormley v General
Motors Corp, 125 Mich App 781, 785-786; 336 NW2d 873 (1983).
In response to the federal amendment, the Michigan Legislature
promptly adopted broad coordination to the extent required by
federal law. MCL 421.27(f)(5) states:
Notwithstanding any other provision of this
subsection, for any week that begins after March 31,
1980, and with respect to which an individual is
receiving a governmental or other pension and
claiming unemployment compensation, the weekly
benefit amount payable to the individual for those
weeks shall be reduced, but not below zero, by the
entire prorated weekly amount of any governmental or
other pension, retirement or retired pay, annuity,
or any other similar payment that is based on any
previous work of the individual. This reduction
shall be made only if it is required as a condition
for full tax credit against the tax imposed by the
federal unemployment tax act, chapter 23 of subtitle
C of the internal revenue code of 1986, 26 USC 3301
to 3311.
The federal mandate for broad coordination was short
lived. In September 1980, Congress amended 26 USC 3304(a)(15)
6
to its present form, which requires only narrow coordination,
i.e., that coordination specified in MCL 421.27(f)(1).
Despite the federal amendment, the Michigan Legislature has
never amended MCL 421.27(f)(5). MCL 421.27 thus retains both
broad and narrow coordination provisions. We now address the
interplay of those provisions.
IV. Principles of Statutory Interpretation
When interpreting statutory language, our obligation is
to ascertain the legislative intent that may reasonably be
inferred from the words expressed in the statute. Wickens v
Oakwood Healthcare System, 465 Mich 53, 60; 631 NW2d 686
(2001). When the Legislature has unambiguously conveyed its
intent in a statute, the statute speaks for itself, and
judicial construction is not permitted. Huggett v Dep’t of
Natural Resources, 464 Mich 711, 717; 629 NW2d 915 (2001);
Donajkowski, supra at 248. Because the proper role of the
judiciary is to interpret and not write the law, courts simply
lack authority to venture beyond the unambiguous text of a
statute.
Courts must give effect to every word, phrase, and clause
in a statute, and must avoid an interpretation that would
render any part of the statute surplusage or nugatory.
Wickens, supra at 60. Further, we give undefined statutory
terms their plain and ordinary meanings. Donajkowski, supra
at 248-249; Oakland Co Road Comm’rs v Michigan Property &
Casualty Guaranty Ass’n, 456 Mich 590, 604; 575 NW2d 751
(1998). In those situations, we may consult dictionary
definitions. Id.
7
V. Analysis
A. Interpretation of MCL 421.27(f)
The Court of Appeals determined that MCL 421.27(f)(5)
controlled over MCL 421.27(f)(1):
We conclude that subdivision 27(f)(5) is
controlling with regard to the coordination of
plaintiff’s retirement benefits. Its purpose was to
conform with the federal government’s goal of
maintaining certain uniformity among the state
programs regarding the coordination requirements for
unemployment compensation, which purpose would be
defeated were Michigan to default to its own
interpretations for coordination under its previous
statutory provisions and, in this case, circumvent
the clear result under subdivision 27(f)(5) that
coordination of plaintiff’s benefits is not
required.
Moreover, the express statutory language
mandates a conclusion that subdivision 27(f)(5)
controls over subdivision 27(f)(1). Subdivision
f(5) was enacted after f(1) and provides:
“Notwithstanding any other provision of this
subsection . . . .” [Emphasis in original.] To
apply subdivision 27(f)(1) independently of
subdivision 27(f)(5) and deny plaintiff unemployment
benefits is inconsistent with the result under
federal law. Such an interpretation also creates an
inconsistency within the statute, contrary to the
rules of statutory construction. In construing
statutes, seeming inconsistencies in the various
provisions should be reconciled if possible.
[Citation omitted.]
Accordingly, the Court of Appeals held that MCL 421.27(f)(5)
exempted plaintiff’s benefits from coordination.
The Court of Appeals failed to give effect to every word
and phrase of MCL 421.27(f). While the court acknowledged the
phrase, “Notwithstanding any other provision of this
subsection” in MCL 421.27(f)(5), it failed to give effect to
similar language in MCL 421.27(f)(1), stating,
“notwithstanding any inconsistent provisions of this act.” In
addition, in finding that MCL 421.27(f)(5) controls over MCL
8
421.27(f)(1), the Court rendered nugatory MCL 421.27(f)(1),
contrary to established rules of interpretation.
We believe that the language of MCL 421.27(f) is clear
and unambiguous and must therefore be enforced as written.
Huggett, supra at 717; Donajkowski, supra at 248. MCL
421.27(f)(1) provides, in pertinent part:
[N]otwithstanding any inconsistent provisions
of this act, the weekly benefit rate of each
individual who is receiving or will receive a
“retirement benefit,” as defined in [MCL
421.27(f)(4)], shall be adjusted as provided in
subparagraph (a) . . . .
(a) If and to the extent that unemployment
benefits payable under this act would be chargeable
to an employer who has contributed to the financing
of a retirement plan under which the claimant is
receiving or will receive a retirement benefit
yielding a pro rata weekly amount equal to or
larger than the claimant's weekly benefit rate as
otherwise established under this act, the claimant
shall not receive unemployment benefits that would
be chargeable to the employer under this act.
[Emphasis added.]
This text requires coordination where the claimant’s
unemployment benefits are chargeable to the employer who
contributed to the financing of the claimant’s retirement
benefits. Thus, “narrow coordination” is required
“notwithstanding any inconsistent provisions of this act
. . . .”
MCL 421.27(f)(5), on the other hand, requires “broad
coordination” where necessary to conform to federal law:
Notwithstanding any other provision of this
subsection, for any week that begins after March 31,
1980, and with respect to which an individual is
receiving a governmental or other pension and
claiming unemployment compensation, the weekly
benefit amount payable to the individual for those
weeks shall be reduced, but not below zero, by the
entire prorated weekly amount of any governmental or
other pension, retirement or retired pay, annuity,
9
or any other similar payment that is based on any
previous work of the individual. This reduction
shall be made only if it is required as a condition
for full tax credit against the tax imposed by the
federal unemployment tax act, chapter 23 of subtitle
C of the internal revenue code of 1986, 26 USC 3301
to 3311. [Emphasis added.]
This provision broadens the coordination required in MCL
421.27(f)(1) by compelling a reduction not only with regard to
pension funds that the chargeable employer contributes, but
also with regard to pension funds “based on any previous
work,” regardless of whether the chargeable employer
contributed the funds. MCL 421.27(f)(5) requires such “broad
coordination” only when necessary to conform to federal law.
Thus, contrary to the Court of Appeals analysis, MCL
421.27(f)(1) and (5) are not inconsistent, but can be
harmonized. While MCL 421.27(f)(1) always requires
coordination of pension benefits that the chargeable employer
contributed, MCL 421.27(f)(5) may also require coordination of
pension benefits on the basis of the claimant’s previous work
if such broad coordination is necessary to conform to federal
law.
Our application of the plain language of these provisions
does not render MCL 421.27(f)(5) nugatory. If Congress again
chooses to require broad coordination, the additional
reduction prescribed in subsection 27(f)(5) will be triggered.
That federal law does not presently require the reduction does
not render MCL 421.27(f)(5) nugatory and does not compel the
Michigan Legislature to amend the statute.
B. The Meaning of “Liquidation”
10
Because MCL 421.27(f)(5) does not apply here,5 the
question remains whether MCL 421.27(f)(1) required
coordination of plaintiff’s benefits. The Court of Appeals
stated in dictum that even if MCL 421.27(f)(1) governed, it
did not require an offset because plaintiff did not receive a
“retirement benefit” within the meaning of MCL
421.27(f)(4)(a). That subdivision provides:
(4)(a) As used in this subdivision, “retirement
benefit” mean a benefit, annuity, or pension of any
type . . . that is:
(i) Provided as an incident of employment under
an established retirement plan, policy, or
agreement, including federal social security if
subdivision (5) is in effect.
(ii) Payable to an individual because the
individual has qualified on the basis of attained
age, length of service, or disability, whether or
not the individual retired or was retired from
employment. Amounts paid to individuals in the
course of liquidation of a private pension or
retirement fund because of termination of the
business or of a plant or department of the business
of the employer involved shall not be considered to
be retirement benefits. [Emphasis added.]
The Court of Appeals determined that plaintiff’s pension was
not a retirement benefit within the meaning of MCL
421.27(f)(4)(a) because the fund was liquidated upon
plaintiff’s termination when Ameritech closed its Traverse
City office. This factual conclusion was erroneous.
Although the Ameritech Traverse City office was closed,
5
Even if MCL 421.27(f)(5) applied, it would not change
the result. Plaintiff did not receive extended benefits, but,
rather, Ameritech contributed to all the pension benefits paid
to plaintiff. Plaintiff did not receive benefits from any
employer other than Ameritech, the chargeable employer. Thus,
even if federal law mandated broad coordination under MCL
421.27(f)(5), the facts of this case implicated only the
narrow coordination already required by MCL 421.27(f)(1).
11
the record does not reflect that the pension fund was
liquidated. Random House Webster’s College Dictionary (2000)
defines “liquidate” as “to settle or pay (a debt),” “to reduce
(accounts) to order,” “to dissolve (a business or estate) by
apportioning the assets to offset the liabilities,” “to
convert (inventory, securities, or other assets) into cash,”
“to get rid of, esp. by killing,” “to break up or do away
with,” and “to liquidate debts or accounts.” The more
pertinent of these definitions contemplate the elimination of
an entire entity or the abolition of all assets or accounts
within an entity. As such, liquidation would involve the
Ameritech pension fund distributing all its assets. The
distribution of a single employee’s vested interest is not a
liquidation of the pension fund. In addition, plaintiff could
have elected to accept her pension benefits as a monthly
annuity, which clearly refutes the Court of Appeals conclusion
that the fund had been liquidated.
Our dissenting colleague maintains that we misconstrue
the meaning of MCL 421.27(f)(4)(a) by failing to consider the
entire sentence in which “liquidation” appears. She attempts
to generate an ambiguity in the phrase “liquidation of a
private pension or retirement fund” by asserting that the
phrase could refer either to an individual’s personal account
or fund or to the collective pension fund. We reject the
dissent’s view.
The meaning of the phrase in MCL 421.27(f)(4)(a)(ii)
hinges on the word “liquidation.” As discussed, the plain
meaning of that term requires distribution of all assets held
12
in the pension fund for all employees. The dissent contends
that the term “liquidate” has many definitions, some of which
may be interpreted to apply to a sole pension account, such as
that belonging to plaintiff. A word is not rendered
ambiguous, however, merely because a dictionary defines it in
a variety of ways. Upjohn Co v New Hampshire Ins Co, 438 Mich
197, 208-209, n 8; 476 NW2d 392 (1991). Rather, the doctrine
of noscitur a sociis requires that the term “liquidation” be
viewed in light of the words surrounding it. Herald Co v Bay
City, 463 Mich 111, 130, n 10; 614 NW2d 873 (2000).
“Contextual understanding of statutes is generally grounded in
the doctrine of noscitur a sociis: ‘[i]t is known from its
associates,’ see Black’s Law Dictionary (6th ed), p 1060.
This doctrine stands for the principle that a word or phrase
is given meaning by its context or setting.” Brown v Genesee
Co Bd of Comm’rs (After Remand), 464 Mich 430, 437; 628 NW2d
471 (2001), quoting Tyler v Livonia Schs, 459 Mich 382, 390
391; 590 NW2d 560 (1999).
In the context of the statute, the term “liquidation”
pertains to multiple accounts rather than to an individual
account. The statute exempts from the category of “retirement
benefits” those amounts “paid to individuals in the course of
liquidation of a private pension or retirement fund.”
Therefore, the text contemplates that liquidation pertains to
multiple accounts and not merely the single account of an
individual pensioner. In addition, the liquidation must occur
because of “termination of the business or of a plant or
department of the business.” Such a termination would involve
13
all employees within the business, plant, or department, and
not merely a single employee. Therefore, in accordance with
the doctrine of noscitur a sociis, the phrase “liquidation of
a private pension or retirement fund” is not ambiguous; the
language clearly refers to the distribution of all assets
within the fund. Moreover, the dissent does not explain how
the fund was liquidated where, as discussed above, plaintiff
could have chosen to collect her pension benefits as a monthly
annuity.
Further, the dissent asserts that MCL 421.27(f)(4)(a) is
a remedial statute that we should construe liberally in favor
of plaintiff. We do not apply preferential rules of statutory
interpretation, however, without first discovering an
ambiguity and attempting to discern the legislative intent
underlying the ambiguous words. Crowe v Detroit, 465 Mich 1,
13; 631 NW2d 293 (2001). Only if that inquiry is fruitless,
or produces no clear demonstration of intent, do we resort to
a preferential or “dice-loading” rule.6 Because no ambiguity
exists, the remedial rule of preference does not apply. Id.
The dissent also asserts that our interpretation of the
statute produces “unconscionable results.” It is not the role
of the judiciary, however, to second-guess the wisdom of a
legislative policy choice. Our constitutional obligation is
to interpret, not to rewrite, the law. The Legislature
apparently determined that the same result should obtain
regardless of whether an employee opts for a monthly annuity
6
See also Scalia, A Matter of Interpretation: Federal
Courts and the Law (Princeton, NJ, 1997) pp 27-29.
14
or for a lump-sum payment. Here, if plaintiff had elected a
monthly annuity in lieu of the lump-sum payment, no question
would exist that she would have been ineligible to receive
unemployment benefits.
Moreover, plaintiff chose to accept her pension benefits
instead of relocating to another Ameritech office. Ameritech
had offered plaintiff the opportunity to continue her
employment in another location, but she declined to do so.
The payout followed plaintiff’s decision to retire rather than
relocate. While the dissent contends that plaintiff had no
choice but to accept her pension benefits, the record does not
support this assertion. Accordingly, the condition set forth
in MCL 421.27(f)(4)(ii), providing an exception to the term
“retirement benefit,” does not apply in this case.
Thus, whether Ameritech’s payment to plaintiff was a
“retirement benefit” depends on whether it was “a benefit,
annuity, or pension of any type” payable to her “because [she]
has qualified on the basis of attained age [or] length of
service . . . .” In defining a “retirement benefit,” the
Legislature has used words of common and ordinary meaning, and
we apply them accordingly. Donajkowski, supra at 248-249;
Oakland Co Rd Comm’rs, supra at 604. It is undisputed that
plaintiff received a pension benefit on the basis of her age
and years of service. Thus, she received a “retirement
benefit” as contemplated in MCL 421.27(f)(4)(a).
C. The Meaning of “Receive or Will Receive”
The Court of Appeals also stated, in dictum, that even if
plaintiff’s distribution were a retirement benefit, it was
15
exempt from coordination because “the Legislature did not
intend the terms ‘receive or will receive’ under § 27(f)(1) to
include the direct rollover of a pension fund to an IRA
. . . .” The Court stated:
This construction of the statute is the most
reasonable and comports with the benefit
interpretations of both the UA and the USDOL. MESC
Revised Benefit Interpretation No. 20.641 (November
29, 1995); USDOL Unemployment Insurance Program
Letter No. 22-87, Change 1 (June 19, 1995). In
reaching our conclusion, we are mindful that the
role of the judiciary is not to engage in judicial
legislation, but rather to determine the way chosen
by the Legislature. [Citation omitted.] We decline
to interpret the statute to incorporate any change
that overrides requirements clearly adopted by the
Legislature. [239 Mich App 47.]
While this issue is one of first impression in the
context of unemployment compensation, it has been addressed in
the somewhat analogous context of worker’s compensation.
White v McLouth Steel Products, decided sub nom Corbett v
Plymouth Twp, 453 Mich 522; 556 NW2d 478 (1996).7 In White,
this Court construed MCL 418.354(1)(d), of the Worker’s
Disability Compensation Act, MCL 418.101 et seq., which
directs that worker’s compensation benefits be coordinated
with “[t]he after-tax amount of the pension or retirement
payments received or being received . . . .” The employee in
White rolled his lump-sum pension distribution into an IRA .
The question was whether the nontaxable nature of the rollover
transfer precluded coordination of the retirement payments
with the worker’s compensation benefits. This Court ruled in
7
See, generally, Drouillard v Stroh Brewery Co, 449 Mich
293, 304-305; 536 NW2d 530 (1995) (holding that the employer
could coordinate a lump-sum pension distribution with worker’s
compensation benefits where the employee had been “forced” to
accept the pension distribution).
16
favor of the employee. It rejected as “literalism” the
employer’s contention that the employee “received” the
transferred amount. This Court also stated that its
interpretation was consistent with the language of MCL
418.354(1)(d), limiting coordination to the after-tax amount
of the pension:
By reason of the tax-free aspect of a rollover
into an IRA , there is no taxable event and, hence,
no tax or “after-tax amount” that is “received or
being received.” [Id. at 547.]
Three justices dissented in White. They opined:
The [majority] opinion dismisses the statute’s
language by labeling as “literalism” defendant
McLouth Steel Products’ argument that under the
statute White has received his pension payment.
Ante at 544. [T]he better phrase would be plain
meaning. Subsection 354(1)(d) provides that weekly
worker’s compensation benefits may be reduced by
the “after-tax amount of the pension or retirement
payments received” by the employee and does not
condition the coordination of pension benefits on
whether the employee actually begins to use these
funds or invests them in a plan in which he will
only later receive payments. . . .
The majority attempts to justify its
interpretation . . . by noting the statute’s use of
the “after-tax amount,” but fails to note that [MCL
418.354(13)] defines “after-tax amount” as the
amount remaining after subtracting the estimated
tax the employee would pay on the benefit, not the
actual tax the employee incurred . . . . [Id. at
562-563 (emphasis in original).[8]
MCL 421.27(f)(1) is the unemployment compensation
counterpart of MCL 418.354(1)(d), but it lacks the “after-tax
amount” language on which the White majority relied in part.
The question here is whether plaintiff “received” the
8
More precisely, MCL 418.354(13) defines “after-tax
amount” as the gross amount remaining after subtracting the
amount “which would have been paid, if any, under . . . state
income tax and federal income tax . . . .” [Emphasis added.]
17
transferred amounts. Random House Webster’s College
Dictionary (2000) defines “receive” as “to take into one’s
possession,” “to have (something) bestowed, conferred, etc.,”
“to hold, bear, or contain,” and “to take, get, accept, or
meet with something.” In light of these definitions, we
conclude that plaintiff received her retirement benefits
within the meaning of MCL 421.27(f)(1), notwithstanding the
fact that Ameritech transferred the funds directly into her
IRA. We disagree with our dissenting colleague that plaintiff
did not take the pension funds into her possession within the
meaning of the dictionary definition of “receive.” The funds
were transferred at plaintiff’s direction. She is able to
withdraw the funds at any time and use them as she sees fit.
Ameritech clearly conferred the funds upon plaintiff, and
plaintiff accepted those funds by directing them into an
account of her choice. Accordingly, it is inescapable that
plaintiff received the funds. Because the dissenting opinion
in White is better reasoned, following that approach, we
conclude that plaintiff “received” the distribution at issue
within the meaning of MCL 421.27(f)(1).9
9
We overrule White to the extent that it is inconsistent
with our present holding. The White majority also relied in
part on the statutory language “after-tax amount” in MCL
418.354(1)(d) in support of its decision. We do not decide
whether that aspect of White was decided correctly because it
is irrelevant to our determination in this case.
Our concurring colleague asserts that overruling White in
part is unnecessary because, unlike the statute in White, the
statute before us does not contain the “after-tax amount”
language. He fails to acknowledge, however, that in addition
to the “after-tax amount” language, the White majority relied
in part on an erroneous definition of “receive,” conditioned
on the taxable nature of the funds in question. The
concurring opinion, therefore, overlooks part of the reasoning
18
Like, the Court of Appeals, the dissent would erroneously
elevate a construction from an extratextual source above the
unambiguous language of the statute itself. As we have stated
repeatedly, courts may not look beyond the clear text of a
statute to discover an unexpressed legislative intent. Sun
Valley Foods Co v Ward, 460 Mich 230, 236; 596 NW2d 119
(1999). Although this Court generally accords due deference
to an administrative agency charged with executing a
particular statute, we grant no deference here because the
plain meaning of the statute controls. “An agency
interpretation cannot overcome the plain meaning of a
statute.” Consumers Power Co v Public Service Comm, 460 Mich
148, 157, n 8; 596 NW2d 126 (1999). The plain and ordinary
meaning of “receive” provides no basis to differentiate
between funds that are taxable and those that are not.
Therefore, MCL 421.27(f)(1) requires coordination whether or
not the funds are subject to taxation when plaintiff received
them by directing their deposit into her IRA account.
VI. Conclusion
We conclude that MCL 421.27(f)(1) required coordination
of plaintiff’s unemployment benefits with her pension
benefits. Plaintiff received a “retirement benefit” within
the meaning of MCL 421.27(f)(1). That subsection required
coordination, whether or not the funds were subject to
taxation at the time of their receipt. Accordingly, we
reverse the judgment of the Court of Appeals and reinstate the
decision of the Board of Review and the judgment of the
upon which the majority in White based its decision.
19
circuit court.
WEAVER , TAYLOR , and YOUNG , JJ., concurred with CORRIGAN , C.J.
20
S T A T E O F M I C H I G A N
SUPREME COURT
NANCY KOONTZ,
Plaintiff-Appellee,
v No. 116366
AMERITECH SERVICES, INC.,
Defendant-Appellant,
and
UNEMPLOYMENT AGENCY of the
MICHIGAN DEPARTMENT OF CONSUMER
AND INDUSTRY SERVICES, formerly
MICHIGAN EMPLOYMENT SECURITY
AGENCY,
Appellee.
________________________________
CAVANAGH, J. (concurring).
I concur with the result in this case that MCL
421.27(f)(1) required coordination of plaintiff’s unemployment
benefits with her pension benefits. However, I write
separately because in reaching this result, it is not
necessary for the majority to adopt the dissent’s approach
from White v McLouth Steel Products, decided sub nom Corbett
v Plymouth Twp, 453 Mich 522; 556 NW2d 478 (1996), and to
overrule White to the extent that it is inconsistent with
today’s holding. In White, this Court construed MCL
418.354(1)(d) of the Worker’s Disability Compensation Act
(WDCA), which provided that worker’s compensation benefits be
coordinated with “[t]he after-tax amount of the pension or
retirement payments received or being received . . . .”
(Emphasis added.) The White Court stated:
The construction that we adopt is consistent
with the language of the statute, which provides
for an offset “of the after-tax amount of the
pension or retirement payments received or being
received by the employee . . . .” (Emphasis added.)
By reason of the tax-free aspect of a rollover into
an IRA, there is no taxable event and, hence, no
tax or “after-tax amount” that is “received or
being received.” [White, supra at 547.]
The instant case involves an unemployment benefits
statute that is similar to the worker’s compensation statute
in White, but does not contain the “after-tax” language.
Although the remaining language in these statutes is similar,
it is not identical. The two statutes are clearly different;
they contain materially different language and arguably serve
different purposes.
Because of the differences between these statutes, the
majority does not need to address White. The White Court
clearly stated that its holding was based on the “after-tax”
language in the WDCA statute it was construing.
2
S T A T E O F M I C H I G A N
SUPREME COURT
NANCY KOONTZ,
Plaintiff-Appellee,
v No. 116366
AMERITECH SERVICES, INC.,
Defendant-Appellant,
and
UNEMPLOYMENT AGENCY of the
MICHIGAN DEPARTMENT OF CONSUMER
AND INDUSTRY SERVICES, formerly
MICHIGAN EMPLOYMENT SECURITY
AGENCY,
Appellee.
___________________________________
KELLY, J. (dissenting).
I respectfully disagree with the majority's conclusion
that plaintiff's unemployment compensation benefits should be
eliminated because she has received retirement benefits as
defined by the Michigan Employment Security Act (MESA). MCL
421.1 et seq. The majority reads the relevant statutory
language as unambiguous, despite strong indications to the
contrary. It fails to consider the entirety of the sentence
in which the word "liquidation" appears and disregards
interpretive letters that define "receive." In so doing, the
majority misconstrues the meaning of MCL 421.27(f)(4)(a).
The Court of Appeals advanced the correct interpretation.
I would affirm its holding that plaintiff did not receive a
"retirement benefit" within the meaning of the act and that
her unemployment compensation benefits should not be
eliminated as a consequence.
I. STATUTORY CONSTRUCTION
When construing a statute, our primary goal is to
ascertain and give effect to the intent of the Legislature in
writing it. Turner v Auto Club Ins Ass'n, 448 Mich 22, 27;
528 NW2d 681 (1995). While judicial interpretation usually is
not permitted where statutory language is clear, a literal
construction must yield when it produces absurd and unjust
results. See Salas v Clements, 399 Mich 103, 109; 247 NW2d
889 (1976). Judicial interpretation is also appropriate when
reasonable minds can differ regarding the meaning of the
language. Adrian Sch Dist v Michigan Pub Sch Emp Retirement
System, 458 Mich 326, 332; 582 NW2d 767 (1998). If judicial
interpretation is necessary, legislative intent is determined
by giving the statutory language a construction that is both
reasonable and that best accomplishes the purpose of the
statute. Frankenmuth Mut Ins Co v Marlette Homes, Inc, 456
Mich 511, 515; 573 NW2d 611 (1998).
A. THE TERM "LIQUIDATION"
The MESA allows unemployment benefits payable under it to
be reduced or eliminated where a claimant is receiving a
"retirement benefit." MCL 421.27(f)(1). It defines that term
as "a benefit, annuity, or pension of any type . . . payable
2
[when] . . . the individual was retired from employment." MCL
421.27(f)(4)(a)(ii). But the act expressly excludes as a
retirement benefit any amounts paid to individuals "in the
course of liquidation of a private pension or retirement fund
because of termination of the business or of a plant or
department of the business of the employer involved . . . ."
1
Id.
In this case, plaintiff lost her job with defendant
because defendant closed the facility where she worked. The
question is whether her retirement funds fall within the
statutory definition of "retirement benefit" or within the
exception.
The expression "liquidation of a private pension or
retirement fund" in § 27(f)(4)(a)(ii) could mean a
distribution of all pension monies that an employer holds for
1
MCL 421.27(f)(4)(a) provides:
As used in this subdivision, "retirement
benefit" means a benefit, annuity, or pension of
any type or that part thereof that is described in
subparagraph (b) that is:
(i) Provided as an incident of employment
under an established retirement plan, policy, or
agreement, including federal social security if
subdivision (5) is in effect.
(ii) Payable to an individual because the
individual has qualified on the basis of attained
age, length of service, or disability, whether or
not the individual retired or was retired from
employment. Amounts paid to individuals in the
course of liquidation of a private pension or
retirement fund because of termination of the
business or of a plant or department of the
business of the employer involved shall not be
considered to be retirement benefits.
3
all its employees. Defendant here maintains that it did not
liquidate its entire pension fund monies when it closed the
facility where plaintiff worked and that the fund continues to
exist. Under this interpretation and in this factual
situation, plaintiff's pension distribution would constitute
retirement benefits and she could not be paid unemployment
benefits.
On the other hand, the clause "liquidation of a private
pension or retirement fund" could mean a distribution of all
pension monies that an employer holds for one or more but not
all of its employees.2 As noted by the majority, the word
"liquidate" has many definitions, including "to settle or pay
(a debt)" and "to convert (inventory, securities, or other
assets) into cash."3 Applying that definition here, defendant
"liquidated" plaintiff's retirement fund when it distributed
the entire contents and closed the account, settling its debt
to plaintiff and converting her pension into cash. Hence, the
distribution would not constitute retirement benefits and
plaintiff could draw unemployment benefits.
The majority offers no persuasive reasoning to support
its conclusion that the "more pertinent" definition of
"liquidate" is that contemplating the elimination of all
corporate pension assets. The mere fact that it prefers this
2
It is not clear from the record whether defendant
distributed retirement funds to all employees in the facility
that it closed. It is known that five other employees were
affected in the same way as plaintiff.
3
See Random House Webster's College Dictionary (2001).
4
to a definition more favorable to plaintiff has no bearing on
what the Legislature intended "liquidate" to mean. The varied
definitions of the word leave room for reasonable minds to
differ. It is inescapable that the statutory language is
ambiguous.
The majority's interpretation, that "liquidation" means
a distribution of all pension monies held for all its
employees, produces unconscionable results. For example, in
this case, Ameritech would never "liquidate" all its pension
fund monies by shutting down one or some of its facilities.
Hence, no employee in plaintiff's situation could ever collect
unemployment benefits. As an extreme example, if defendant
discharged all its employees, it could distribute all but one
dollar of the funds in the pension fund. Then, the fund would
not have been liquidated under the majority's reading because
all the assets would not have been distributed. In so doing,
defendant could reduce or eliminate all its employees'
unemployment benefits. The Legislature could not have
intended the result in either example.
The practical implications of the majority's reading of
§ 27(f)(4)(a)(ii) are enormously detrimental to employees like
plaintiff. During plaintiff's hearing before the Michigan
Employment Security Board of Review, defendant's human
resources manager testified that there is a single common
trust fund for pension monies to which both defendant and
Michigan Bell contribute. Absent closure of the entire
corporation and all its pension funds, whenever defendant
shuts down one facility, it will always escape paying
5
unemployment benefits to the employees who worked there.
The majority distorts the facts of this case by
portraying plaintiff's acceptance of her pension funds as a
choice. Defendant offered plaintiff two other jobs in its
corporation. However, both were located approximately two
hours from her residence. When plaintiff declined them
because the commute would be unreasonable, defendant
distributed her retirement funds. She did not have the option
to leave them in defendant's trust fund. She was obliged to
have them rolled into an IRA or paid to her in a monthly
annuity.4 It is in light of these facts that defendant
believes the funds were not liquidated within the meaning of
MCL 421.27(f)(4)(a)(ii).
My construction of § 27(f)(4)(a)(ii) is in keeping with
the fact that the MESA is a remedial statute. As such, by
principle, it should be liberally construed to afford benefits
to a displaced employee. Empire Iron Mining Partnership v
Orhanen, 455 Mich 410, 415-416; 565 NW2d 844 (1997). My
construction also furthers the purpose of the act, which is
"to lighten the burden of economic insecurity on those who
become unemployed through no fault of their own." Id. at 417.
B. THE PHRASE "IS RECEIVING OR WILL RECEIVE"
I also disagree with the majority's rejection of the
Court of Appeals finding that, within the meaning of MCL
4
Defendant did not at any point during the trial and
appellate proceeding contest this. Accordingly, there is no
reason for this Court to question the accuracy of plaintiff's
assertion that she was required to see her retirement funds
distributed. The record supports the claim.
6
421.27(f)(1), the funds were not "received." Once again, the
majority brushes aside reasonable interpretations other than
its own and characterizes a word as unambiguous.
The facts of this case show that plaintiff did not take
the pension funds into her possession within the dictionary
definition of "receive." Instead, defendant transferred the
funds directly into an individual retirement account in her
name.
The Court of Appeals decision interpreted "receive" by
relying in part on interpretive letters issued by the United
States Department of Labor (USDOL)5 and the Michigan
Employment Security Commission.6 Both conclude that, when an
employer transfers an employee's retirement funds into an
individual retirement account, the employee does not receive
them for purposes of the relevant unemployment compensation
laws.
The majority ignores these letters, choosing instead to
construct a definition of "receive" on the basis of a
dissenting opinion7 and dictionary definitions. However, it
is a long-established principle of law that "'[t]he
5
USDOL Unemployment Insurance Program Letter No. 22-87,
Change 1 (June 19, 1995).
6
Michigan Employment Security Commission Revised Benefit
Interpretation No. 20.641 (November 29, 1995).
7
The majority adopts the reasoning from the dissenting
opinion in White v McLouth Steel Products, decided sub nom
Corbett v Plymouth Twp, 453 Mich 522; 556 NW2d 478 (1996). In
so doing, it reverses that part of White that is inconsistent
with its holding. There is no reason to reach White. That
case is easily distinguishable on the basis of the statutory
provisions involved.
7
construction given to a statute by those charged with the duty
of executing it is always entitled to the most respectful
consideration and ought not to be overruled without cogent
reasons.'" Oakland Schs Bd of Ed v Superintendent of Pub
Inst, 401 Mich 37, 41; 257 NW2d 73 (1977), quoting United
States v Moore, 95 US (5 Otto) 760; 24 L Ed 588 (1877).
The majority offers no cogent reason to deviate from the
administrative agencies' interpretations, which provide a
reasonable construction of the statutory language consistent
with the purpose and the policy of the MESA. This Court
should accord that interpretation due deference and hold that
plaintiff did not receive a retirement benefit within the
meaning of § 27(f) of the MESA.
II. PUBLIC POLICY
The controversy here regarding the correct interpretation
of the statutory definition of "retirement benefit" is best
resolved by considering the public policy expressly declared
in the MESA. It provides:
Economic insecurity due to unemployment is a
serious menace to the health, morals, and welfare
of the people of this state. Involuntary
unemployment is a subject of general interest and
concern which requires action by the legislature to
prevent its spread and to lighten its burden which
so often falls with crushing force upon the
unemployed worker and his family, to the detriment
of the welfare of the people of this state. Social
security requires protection against this hazard of
our economic life. Employers should be encouraged
to provide stable employment. The systematic
accumulation of funds during periods of employment
to provide benefits for periods of unemployment by
the setting aside of unemployment reserves to be
used for the benefit of persons unemployed through
no fault of their own, thus maintaining purchasing
power and limiting the serious social consequences
of relief assistance, is for the public good, and
8
the general welfare of the people of this state.
[MCL 421.2.]
The majority disregards this part of the act despite the
fact that the Legislature's declaration of public policy
contained there is of paramount importance. Plaintiff lost
her position with defendant as a result of defendant's
decision to close the facility where she worked. She had
vested pension benefits that defendant distributed and treated
as hers prematurely.
Had defendant offered plaintiff reasonable employment,
plaintiff could have left her pension benefits undisturbed.
Instead, it terminated plaintiff's employment and prevented
her from drawing unemployment benefits. It required her to
choose between paying her current living expenses or preseving
her retirement monies, contrary to the explicit public policy
of the state. Defendant's scheme only exacerbated plaintiff's
economic insecurity.
III. CONCLUSION
Ambiguity exists in the statutory language of
§ 27(f)(4)(a) of the MESA that defines a "retirement benefit"
as not including an amount paid in the course of liquidation
of a private pension or retirement fund. The Court should
ascertain the Legislature's intent in using that expression by
referring to the stated purpose of the MESA and the underlying
public policy. With these in mind, the only reasonable
construction is one that defines a pension distribution made
under the circumstances of this case as not constituting a
"retirement benefit."
9
The meaning of "receive" is also subject to differing
reasonable interpretations. In construing it, this Court
should defer to the meaning that the state and federal
agencies responsible for administering unemployment
compensation have given to it. The majority ignores this
principle, preferring a definition constructed from a
dissenting opinion and dictionary definitions, which it
contends is in keeping with the plain meaning of the statute.
This approach is contrary to the reasonable interpretation
advanced by the administrative agencies and to the purpose of
and the policy underlying the MESA. The term should be
construed as not inclusive of retirement funds transferred
directly into an individual retirement account.
I would affirm the Court of Appeals holding that
plaintiff was entitled to unemployment compensation benefits
under the MESA.
MARKMAN , J., took no part in the decision of this case.
10