Lawmaker to Propose Changes to State Unemployment Compensation System

Gongwer News Service - January 20, 2006

Gongwer News Service

Elderly, jobless Ohioans could see an increase in their unemployment compensation if the legislature approves a measure that may soon be introduced in the General Assembly.

With the increasing trend of people continuing to work well beyond the traditional retirement age, more unemployed workers are eligible for both Social Security and unemployment insurance.

But Ohio is the only state to deduct 100% of an individual’s Social Security income from the benefits they would receive from unemployment insurance, according to Rep. Bill Seitz (R-Cincinnati).
Some states offset unemployment compensation by 50% of their Social Security payments, but most states have eliminated offset laws entirely.

“I believe the current offset law is age discrimination,” Rep. Seitz said in an interview. Recipients of food stamps, Medicaid, and other types public assistance don’t have their unemployment benefits offset by those programs, he noted. “But most people who get Social Security are elderly.”

Offsetting unemployment benefits saves an average of approximately
$12.5 million each year in payments, according to the Department of Job and Family Services.

It also causes undue hardship on older workers, some of whom find their unemployment payments fall to zero, according to Rep. Seitz and some advocacy groups.

The issue was originally brought to his attention by a widow in his district who lost her job “and was shocked when she got her first unemployment check and it was $13” because of the Social Security offset.

Rep. Seitz said he has been working on a proposal with Reps. Thom Collier (R-Mt. Vernon) and Tim Schaffer (R-Lancaster), both of whom sit on the Unemployment Compensation Advisory Council. The panel has recently considered the issue and Rep. Seitz wants to ensure that its package of recommendations due soon will include a proposal to reduce the offset amount.

The proposal, which he said would affect about 3,000 Ohioans, reduces the current 100% Social Security offset to 50%. “What I’m proposing is the first step,” he said adding that it was a compromise between business interests and advocacy groups like Policy Matters Ohio, which would like to see the offset entirely eliminated.

A 50% reduction of the offset would cost the Unemployment Insurance Trust Fund about $6.2 million, according to figures supplied by ODJFS. Spokesman Jon Allen said the department has no position on the proposal. “But the question is always: what is going to be the impact on the taxes employers pay?”

Furthermore, it’s unknown how many more people would apply for the program, he said. Knowing that their Social Security benefit would eliminate their unemployment compensation, many people never bothered to apply for the program.

Policy Matters points out that the cost of eliminating the offset entirely would represent a fraction of the state’s reserves with the trust fund’s balance at about $450 million as of last week.

“It sounds like a lot of money, but it’s three times below the minimum safe level set by the legislature,” said Andrew Doehrel, president of the Ohio Chamber of Commerce and UCAC co-chair. Changing the Social Security offset would translate into added costs for employers, he said.

“Is this system the right place to address these issues?” he asked, noting that unemployment insurance was designed to help working people who’d lost their job and Social Security was meant to be a retirement benefit.

Mr. Doehrel acknowledged the evolving demographics of the labor market but argued that the entire retirement system should be realigned rather than making the unemployment system subsidize retirement. “The system was set up to do a certain thing. If you force it into other forms it’s going to cause problems.”

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