 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
MANAGING UNEMPLOYMENT COMPENSATION LIABILITY:
WORKFORCE REDUCTIONS AND
SEPARATION PAYMENTS
PREPARED FOR:
YOUR ORGANIZATION
PRESENTED BY:
NEIL A. MAC VICAR
VICE PRESIDENT / ATTORNEY
UNEMPLOYMENT COMPENSATION PROGRAM
MICHIGAN HEALTH & HOSPITAL ASSOCIATION SERVICE CORPORATION
6215 WEST ST. JOSEPH HIGHWAY
LANSING, MICHIGAN 48917
DIRECT DIAL: 517/886-8331
CELLULAR PHONE: 517/749-2283
WORK FAX: 517/323-0913
E-MAIL: nmacvicar@mha.org
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
Table of Contents
Funding Michigan’s Unemployment System
3
Required Unemployment Compensation Notice — UA Form 1711
4
Severance and Salary Continuation Payments
5-6
Proposed Language for Allocating Severance and Salary
Continuation Payments
7-8
Using “Supplemental Unemployment Benefits” To Reduce
The “Tax Cost” of Severance payments
9
Payment In Lieu Of Notice
9 - 10
Allocating Accrued Vacation and Sick Time
11 - 12
Proposed Language For Allocating Accrued Vacation Pay
13 - 15
Early Retirement and Payment of Retirement Benefits
16
Refusal of Suitable Work
17 - 18
Check List of Unemployment Compensation Issues
19
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
FUNDING MICHIGAN'S UNEMPLOYMENT COMPENSATION SYSTEM
Unemployment compensation benefits are one hundred percent (100%) funded by employers. Therefore,
employers have a great incentive to monitor their unemployment liability, protest all claims that may
result in a disqualification or an ineligible determination, and implement steps that may reduce potential
unemployment liability. This document discusses methods and techniques to reduce unemployment
liability — particularly when a workforce reduction or reorganization is under consideration.
It is critical to understand that your organization is a “reimbursing employer” with the Michigan
Unemployment Insurance Agency. Reimbursing status brings many benefits, but also poses significant
liability when faced with changes in the workforce. "Non-profit" employers [as defined by the Internal
Revenue Code Section 501(c)(3)] — such as your organization [and other hospitals, nursing homes,
government entities and other health care providers] — may elect to “reimburse” the Michigan
Unemployment Insurance Agency (UIA) for all benefits actually paid to claimants during the year, instead
of paying an unemployment payroll tax. When an employer elects reimbursing status, its unemployment
liability is determined by actual benefits received by claimants — the UIA charges the reimbursing
employer one dollar for each dollar paid to the claimant. If there are no benefits charged to the
reimbursing employer, then the reimbursing employer pays nothing to the UIA. As a reimbursing
employer, your organization clearly has a strong interest in protesting unsubstantiated and
questionable claims, and has a strong incentive to implement methods and techniques that can
reduce unemployment liability exposure.
"For-profit" employers (and "non-profit" employers who do not elect reimbursing status) contribute to the
state unemployment compensation fund through a state payroll tax. The employer's payroll is taxed each
calendar quarter. The tax ranges between one percent (.1%) and ten percent (10%) on the first $9,500 of
each employee's annual wages. The contributing employer's actual tax rate fluctuates with the number of
unemployment compensation claims paid during the previous five years (or 20 quarters) and the amount
of monetary reserves the contributing employer has built up in the state unemployment compensation
fund. Increased claim activity generally results in a higher annual payroll tax rate for the contributing
employer.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
NOTICE TO THE EMPLOYEE — UA FORM 1711
The Michigan Unemployment Insurance Agency’s Administrative Rules [R 421.204] require
that all separated employees be provided an “Unemployment Compensation Notice” [UA Form
1711]. The notice indicates the employer’s name, address and UA account number, and
instructs the employee on when to report to the Unemployment Insurance Agency. The
employee presents the notice to the Agency upon filing an unemployment claim
The notice must be provided to the employee at the time of hire, during employment, or prior to
the last day of work.1 The MHASC Unemployment Compensation Program recommends that
the notice form be provided to each employee at the time of separation, but not later than the
last day of work. The Michigan Unemployment Insurance Agency can assess a monetary
penalty for failing to provide the notice to separated employees.
The form is available by contacting MHASC Unemployment Compensation Program, or can be
accessed on the internet at http://www.michigan.gov/documents/ua_1711_3844_7.pdf.2 The
completed notice form is always included in the “Unemployment Compensation Information”
packets prepared by the MHASC Unemployment Compensation Program — see the checklist
on page 19 of this document. Please note that the Agency does allow employers to give notice
in a format other than actual use of Form 1711. The notice must provide comparable
information and should be pre-approved by the Agency — the UCP can assist you in drafting a
custom-designed comparable notice that is pre-approved by the Agency.
Please contact the UCP for more information concerning the issuance of UA Form 1711.
1
To ensure immediate compliance, you may want to include Form 1711 in a payroll mailing to cover all current employees
and implement procedures to present this document to all new employees at the time of hire. If you plan to give notice to all
employees, be sure to include procedures for providing notice to your employees currently on leave of absence and your oncall/contingent employees.
2
If you prepare UA Form 1711 on your own, be sure to list the MHASC Unemployment Compensation Program has your
organization’s address of record: c/o MHASC Unemployment Compensation Program, 6215 W. St. Joseph Hwy., Lansing,
MI 48917. Otherwise, the UIA may mail all claim documents, notices, determinations, and decisions directly to you.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
SEPARATION PAYMENTS: SEVERANCE PAY AND SALARY CONTINUATION
Prior to April 2002, most post-separation payments [such as severance pay and salary
continuation] had no affect on a claimant’s eligibility to collect unemployment benefits. On
April 26, 2002, Governor Engler signed a bill that amended the Michigan Employment Security
Act. One significant change affected the handling of severance pay and salary continuation.
Now, amounts received by employees as severance pay or salary continuation will be treated as
earned wages, and can be used to offset the claimant’s weekly benefit amount. As such, a
claimant receiving severance pay or salary continuation will have their weekly benefit amount
reduced.
Please note, however, that there is one major issue with regard to the payment of severance pay
and salary continuation — it involves the timing of the payments:
Lump Sum Payment:
If the severance payment or salary continuation is made in a lump sum, then it will only affect the
unemployment clam in the week actually paid — for example, a six week lump sum severance
payment will only impact one week of unemployment benefits. This outcome can only be
avoided by specifically “allocating” the payment. When lump sum payments are made for
severance or salary continuation, we recommend that you specifically allocate the payment over a
designated period of time. The allocation process must meet very specific guidelines — for
example, (a) written notice must be provided on or before the last day of work, (b) the notice
must indicate the specific dates of the allocation period, (c) the notice must indicate the amount
allocated each week, and (c) it must indicate that the payment will affect the employee’s eligibility
for unemployment benefits. For an example of a proper written allocation notice of a lump sum
payment, please see the example on page 8 — “Allocating Severance Pay and Salary
Continuation” [also, see pages 14 and 15 for additional examples]
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
Periodic Payments:
If severance or salary continuation payments are made periodically over a period of time, then an
allocation notice may still be required — especially if the payments will be made on regular pay
cycles. Again, severance pay and salary continuation will only affect the unemployment claim in
the week actually paid — if payments are made on two-week pay cycles, then the employee will
receive unemployment every other week, and severance every other week. As such, it is
important for employers to make specific written allocation of the payments to cover all weeks in
the severance pay or salary continuation period. See page 7 for an example of a properly
structured allocation notice for periodic payments — “Allocating Severance Pay/Salary
Continuation” [also, see pages 14 and 15 for additional examples].
Caution — Review, Future Litigation, and Judicial Interpretation:
Since the April 2002 law change, this new provision involving severance pay and salary
continuation are currently the subject of litigation. As such, we urge you to consult with the MHA
Unemployment Compensation Program prior to implementing workforce reductions that offer
severance pay or salary continuation.3
Since the technical requirements surrounding this option are strictly enforced by the state, the MHASC
Unemployment Compensation Program will assist you in preparing the appropriate documents — but it
is important that we get advance notice of your workforce restructuring plans. Please contact the
MHASC Unemployment Compensation Program for more information concerning the payment of
severance or salary continuation. Most importantly, please forward your final draft of the
allocation letter to the MHASC Unemployment Compensation Program for review and
comment.
3
With regard to severance pay and salary continuation, there is one other option for employers to consider. One method for reducing
unemployment liability is to contractually reduce the amount of severance or salary continuation if unemployment benefits are collected
during a period of severance pay or salary continuation. For example, some organizations include language into their severance
agreements allowing the employer to reduce the severance pay by the amount of unemployment benefits collected 3:
Employees who apply for and collect unemployment benefits during the severance period will
have their severance payments reduced dollar-for-dollar based on the unemployment benefits paid
by the Michigan Unemployment Insurance Agency. This will apply during the entire severance
period. Employees have the right to file an employment claim with the Michigan Unemployment
Insurance Agency at any time.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
PROPOSED LANGUAGE FOR ALLOCATING
SEVERANCE PAY OR SALARY CONTINUATION
Example One [Severance Paid on Regular Pay Periods After Separation]:
This is an example letter for properly allocating severance which will be paid on regular pay
cycles after the date of separation [ie: every two weeks]. If you have any questions, please call
our office to obtain clarification. We recommend that you forward your final draft of this
letter to our office for review and comment.
May 31, 2005
Dear Ms. Jones:
In connection with your separation from employment, you will receive payments for severance pay.
Severance payments will be made at the end of each pay period. For the purpose of unemployment
compensation, the payments are allocated over a specific period of time. A breakdown of the payments
and the allocation period is listed below:
Hourly Rate:
$12.00 per hour
Weekly Allocation
$480.00
Severance Pay:
80 hours [2.0 weeks]
Allocation Dates:
June 1, 2005 – June 14, 2005
Please be advised that the allocated severance payments may render you ineligible for
unemployment compensation during the specified allocation period. You do, however, have the right to
file for unemployment compensation after your separation.
Acknowledgement of Receipt:
Human Resources
Cc:
Date
Employee
Date
Human Resources
MHASC Unemployment Compensation Program
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
PROPOSED LANGUAGE FOR ALLOCATING
SEVERANCE PAY OR SALARY CONTINUATION
Example Two [Severance Paid in a Lump Sum at the Time of Separation]:
This is an example letter for properly allocating severance pay that is paid in a lump sum on or
near the date of separation. If you have any questions, please call our office to obtain
clarification. We recommend that you forward your final draft of this letter to our office
for review and comment.
May 31, 2005
Dear Ms. Jones:
In connection with your separation from employment, you are receiving a lump sum payment for
severance pay. For the purpose of unemployment compensation, this payment is being allocated over a
specific period of time. A breakdown of the payment and the allocation period is listed below:
Hourly Rate:
$12.00 per hour
Weekly Allocation
$480.00
Severance Pay:
80 hours [2.0 weeks]
Allocation Dates:
June 1, 2005 – June 14, 2005
Please be advised that the allocated severance payment may render you ineligible for
unemployment compensation during the specified allocation period. You do, however, have the right to
file for unemployment compensation after your separation.
Acknowledgement of Receipt:
Human Resources
Cc:
Date
Employee
Date
Human Resources
MHASC Unemployment Compensation Program
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
USING “SUPPLEMENTAL UNEMPLOYMENT BENEFITS” TO REDUCE THE
“TAX COST” OF SEVERANCE PAYMENTS
There is a method for reducing the tax cost or expense of severance payment programs by offering
“supplemental unemployment benefits” to employees. The expense reduction involves FICA and
Medicare taxes — supplemental unemployment benefits are not subject to FICA and Medicare taxes.
Therefore, an employer can significantly reduce the cost of separation payments by eliminating the “tax
cost” [FICA and Medicare] that is generally assessed on separation payments by paying supplement
unemployment compensation. This is an option that your organization should explore given the
magnitude of its potential workforce reduction and reorganization. The MHASC Unemployment
Compensation Program can provide you with more information about this particular concept and
provide resources for implementing this strategy.
PAYMENT IN LIEU OF NOTICE
Another type of post-separation payment that may affect a claimant’s unemployment claim is
PAYMENT OF WAGES IN LIEU OF NOTICE (PILN)4. PILN will delay the claimant's
eligibility to collect unemployment benefits during the notice period. Before the Michigan
Unemployment Insurance Agency (UIA) will treat monies paid as PILN, very specific
requirements must be satisfied. An employer cannot simply label separation payments as PILN
and expect to delay a claimant's eligibility to collect unemployment benefits. In order for
separation payments to qualify as PILN, an employer must satisfy the following requirements:
1.
The employer must have an established policy or practice giving
employees advance notice of a pending separation. If the organization is
subject to providing notice under the WARN Act, then wages paid during
that notice period will be considered PILN.
2.
Payment of wages must be made “in lieu of” notice.
3.
The payment of wages in lieu of notice will be carefully reviewed by the
UIA to determine if the payment is something other than PILN.
This includes amounts paid for notice pursuant to the Workers’ Adjustment and Retraining Notice Act [WARNA Notice]
2
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
If a payment constitutes PILN, the claimant’s eligibility to collect unemployment benefits may be
delayed. During the period that wages are paid in lieu of notice, the claimant will be held
ineligible to collect unemployment benefits because the payments are treated as earned wages or
remuneration.
Below is an example of how the payment of wages in lieu of notice may affect a claimant’s
eligibility for unemployment benefits:
If an employee is given two weeks notice of a pending separation pursuant to the
employer's “notice policy,” the employee will receive pay for eighty (80) hours of
wages on his/her last day of work. The payments will cover the period of July 1,
2005 through July 14, 2005. Assuming that proper notice of separation is given to
the employee, the UIA will treat the payments as PILN and hold the employee
ineligible to receive unemployment benefits until July 15, 2005. After July 15,
2005, the employee will be entitled to collect up to 26 weeks of unemployment
benefits.
One final note regarding this type of payment: The payment of wages in lieu of notice should
be paid in total on or before the last day of the calendar quarter in which the employee last
works. Making the payments prior to the end of the calendar quarter will reduce your
future unemployment exposure on this separation.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
ALLOCATING ACCRUED VACATION AND SICK TIME
Your organization can also delay an employee’s eligibility for unemployment benefits by properly
“allocating” accrued vacation time and accrued sick time. If a claimant finds a job during the delay
period or before benefits are exhausted, then your organization will realize a direct savings on
unemployment liability. This technique often results in significant savings for employers.
Attached is a sample notice with language that “allocates” payment for accrued vacation time. It is
important to remember that the allocated payment notice must be provided to the employee and the
union or collective bargaining agent on, or before, the employee’s last day of work. Posting notice of
the allocation policy in an area frequented by employees is also recommended. When an allocation is
implemented, we also suggest that the employee sign and date a “file copy” of the notice, in case proof
of receipt is needed at a later date. Payment of the accrued vacation time can be paid in a lump sum or
in periodic payments after the last day of work [on regularly scheduled paydays] — but should be made
no later than the last day of the calendar quarter in which the separation occurs.5
Each employee will have different amounts of accrued vacation hours — as such, each notice will have
to be individually calculated because each employee will have different allocation periods. Also, keep
in mind that for unemployment purposes a “week” runs from Sunday through Saturday.
There are very technical requirements imposed by the Agency for properly allocating vacation
payments. We recommend that you contact us: (1) prior to implementing this concept; (2) if you
intend to amend your current policies or past practices to accommodate this concept; or (3) if
application of this concept involves a significant number of unemployment claims. We will review
your policies, your notice letter, and your posted notice to ensure compliance with the Agency’s strict
requirements.
5
If your organization also allocates accrued sick time, then special rules apply which may affect the allocation of accrued
vacation time. Contact the MHASC Unemployment Compensation Program for details and more information.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
Accrued sick time can also be allocated — but will only affect the unemployment claim in the week
that the allocated sick time is actually paid. Therefore, to maximize the impact on an unemployment
claim, the accrued sick time must be paid in weekly payments after the last day of work. If accrued
sick time is paid in a lump sum, then there will be an impact on the unemployment claim for only the
week that lump sum payment was made.
Since the technical requirements surrounding this option are strictly enforced by the state, the MHASC
Unemployment Compensation Program will assist you in preparing the appropriate documents — but it
is important that we get advance notice of your workforce restructuring plans. Please contact the
MHASC Unemployment Compensation Program for more information concerning the payment of
severance or salary continuation. Most importantly, please forward your final draft of the
allocation letter to the MHASC Unemployment Compensation Program for review and
comment.
One final note regarding these types of payments: The payment of accrued vacation time and
accrued sick time should be paid in total on or before the last day of the calendar quarter in
which the employee last works. Making the payments prior to the end of the calendar
quarter will reduce your future unemployment exposure on this separation.
Examples of three “notice” letters are found on the next pages.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
PROPOSED LANGUAGE FOR ALLOCATING
ACCRUED VACATION AND SICK PAY
Example One [Vacation Allocation Only]:
This is an example letter for properly allocating accrued vacation pay. The payment of the
accrued vacation pay can be paid in lump sum or on regularly scheduled pay dates. If you have
any questions, please call our office to obtain clarification. Also, we recommend that you
forward your final draft to our office for review and comment.
June 30, 2005
Dear Mr. Jones:
In connection with your separation from employment, you will receive payment for
your accrued vacation time. This payment will be made in one check totaling $XXX.XX 6. For
purposes of unemployment compensation, this payment will be allocated over a specific period
of time. A breakdown of the payment and the allocation period is listed below:
Total Hours of Accrued
Vacation Time:
160 hours [4.0 weeks]
Hourly Rate:
$12.00 per hour
Weekly Allocation
$480.00
Allocation Period:
July 1, 2005 – July 28, 2005
Please be advised that allocated vacation payments may render you ineligible for
unemployment compensation during the specified allocation period. You do, however, have
the right to file for unemployment compensation after your separation.
Acknowledgement of Receipt:
Human Resources
Cc:
6
Date
Employee
Date
Human Resources
MHASC Unemployment Compensation Program
Collective Bargaining Unit [if applicable]
Lump sum payment is optional. Payments can be made on regularly scheduled pay periods.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
Example Two [includes vacation allocation, notice pay, sick pay, and severance pay]:
This is an example letter for paying notice pay, accrued sick time and properly allocating
accrued vacation pay. The payment of notice pay, accrued vacation pay and severance pay can
be paid in lump sum or on regularly scheduled pay dates. The payment of sick time will impact
the unemployment claim only in the week that the payment is actually made — if a lump sum
payment is made, then only one week will be affected; if payments are made weekly, then each
week will be affected. Since this is a very technical area and strictly enforced by the Michigan
Unemployment Insurance Agency, you should contact our office for full consultation and to
obtain clarification on all requirements. Again, we recommend that you forward your final
draft to our office for review and comment.
June 30, 2005
Dear Ms. Jones:
In connection with your separation from employment, you will receive the following
payments: payment of wages in lieu of notice, payment of accrued sick time, payment for
accrued vacation time, and severance pay. These payments will be made on your last day of
work and at the end of each pay period. For purpose of unemployment compensation, these
payments are allocated over specific periods of time. A breakdown of the payments and the
allocation periods are listed below:
Hourly Rate:
$12.00 per hour
Weekly Allocation
$480.00
Accrued Sick Time:
Allocation Dates:
40 hours [1.0 week]
July 1, 2005 – July 7, 2005
Total Hours Notice Pay:
Allocation Dates:
80 hours [2.0 weeks]
July 8, 2005 – July 28, 2005
Total Hours of Accrued
Vacation Time:
Allocation Period:
160 hours [4.0 weeks]
July 22, 2005 – August 18, 2005
Total Hours of Severance Pay:
Allocation Dates:
120 hours [3.0 week]
August 19, 2005 – September 3, 2005
Please be advised that each of these allocated payments may render you ineligible for
unemployment compensation during the specified allocation period. You do, however, have
the right to file for unemployment compensation after your separation.
Acknowledgement of Receipt:
_
Human Resources
Cc:
Date
Employee
Date
Human Resources
MHASC Unemployment Compensation Program
Collective Bargaining Unit [if applicable]
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
Example Three [includes severance pay and accrued vacation pay]:
This is an example letter for properly allocating severance pay and accrued vacation pay. The
payments can be made in a lump sum or on regularly scheduled pay dates. Since this is a very
technical area and strictly enforced by the Michigan Unemployment Insurance Agency, you
should contact our office for full consultation and to obtain clarification on all requirements.
Again, we recommend that you forward your final draft to our office for review and
comment.
June 30, 2005
Dear Ms. Jones:
In connection with your separation from employment, you will receive your accrued vacation time
and payments for severance pay. For the purpose of unemployment compensation, the payments are
allocated over a specific period of time. A breakdown of the payments and the allocation period is listed
below:
Weekly Allocation:
$650.00
Severance Pay:
400 hours [10.0 weeks]
Accrued Vacation:
122 hours [3.0 weeks]
Severance Allocation Dates:
July 1, 2005 – September 8, 2005
Vacation Allocation Dates:
September 9, 2005 – September 29, 2005
Please be advised that the allocated severance payments and accrued vacation pay may render you
ineligible for unemployment compensation during the specified allocation period. You do, however, have
the right to file for unemployment compensation after your separation.
Acknowledgement of Receipt:
Human Resources
Cc:
Date
Employee
Date
Human Resources
MHASC Unemployment Compensation Program
Collective Bargaining Unit [if applicable]
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
SPECIAL NOTE ON PAYMENT OF NOTICE PAY, VACATION PAY AND
SEVERANCE PAY:
The UCP recommends that you pay all amounts for accrued PTO and/or notice pay by the end of the
calendar quarter in which the employee is separated. For example, if a separation occurs on June 15th,
then payment for accrued vacation time and/or notice pay should be actually issued on or before June
30th. Payments for accrued vacation pay and notice pay are considered “wages” for the purpose of
establishing an unemployment claim. If any amounts are paid after the current calendar quarter, those
payments extend your potential liability on unemployment claims filed in the future by the employee.
Severance pay is not considered "wages" and is not required to be paid by the end of the current
calendar quarter. But there is another important issue with severance pay — since severance pay is not
considered “wages,” you need to make sure that severance payments do not appear on future wage
reports to the Unemployment Insurance Agency [UIA]. As you know, your organization reports each
employees’ wages to the UIA at the end each calendar quarter. Again, you need to make sure that
severance pay is not reported as “wages” to the UIA on future reports. If severance is reported as
“wages”, those amounts may be used to establish a claim in the future. Although the UCP can protest
the use of severance to establish future unemployment claims, we may have to go to through several
appeals and go a hearing on that issue — which is avoidable by not reporting severance as wages to
begin with.
Please contact the UCP for clarification on this issue or if you have any questions.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
EARLY RETIREMENT AND PAYMENT OF RETIREMENT BENEFITS
Voluntary resignations resulting from buy-out plans, incentive plans, and offers of early retirement may
disqualify an employee from receiving unemployment benefits altogether. This is another area of
unemployment compensation that is quite technical, and we encourage you to consult with us in
advance of implementing these types of programs. The authoritative Michigan Court of Appeals case
that addresses this issue in more detail is McArthur v Borman’s, 200 Mich App 686 (1993).
When early retirement is offered with some type of monetary incentive, the employee will generally be
disqualified from receiving unemployment benefits under the voluntary leaving provision of the
Michigan Employment Security Act. It is important to note that this applies only to the situation where
the employee voluntarily elects to accept the early retirement offer.
When employees are involuntarily separated from employment [lay-off], they are generally entitled to
unemployment benefits. If, however, the employees are offered payment of their accrued retirement
benefit, then the unemployment claim may be affected. The impact on the unemployment claim is an
“off-set” on the weekly unemployment benefit amount [up to $362 per week]. The “off-set” is the
weekly value of the actual retirement benefit received, or the weekly value of an anticipated monthly
annuity payment under the plan. Although there are conflicting interpretations between the Michigan
Unemployment Insurance Agency, the Michigan Employment Security Board of Review, and
Michigan’s appellate courts, this concept may apply to those employees who are involuntarily
separated and roll their lump sum retirement benefits into a qualified Individual Retirement Account
[IRA]. The “IRA roll-over” issue is currently under consideration by the Michigan Supreme Court.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
REFUSAL OF SUITABLE WORK
Offering “suitable work” to an employee may also reduce your unemployment liability. If an employee
refuses an offer of suitable work, the employee’s unemployment benefits are reduced by up to thirteen
(13) weeks, and they cannot collect the remaining benefits for an additional thirteen (13) weeks. This
provision is only effective when an employee refuses an offer of suitable work — but, each element
must be satisfied.
Under the MES Act, suitable work is determined by weighing the following factors: (1) the
degree of risk involved to an individual's health, safety, and morals; (2) the individual's physical
fitness; (3) prior training; (4) the individual's prior work experience; (5) the individual's prior
earnings7; (6) prospects for securing local work in the claimant's customary occupation; and (7)
the distance of the available work from the claimant's residence. A claimant may only refuse an
offer of suitable work for good cause to avoid the partial disqualification. Good cause for refusing
an offer of suitable work is determined by reviewing the factors listed above and is determined on
a case-by-case basis.
The MHASC Unemployment Compensation Program recommends that offers of suitable work be
made in writing. Below is a check list of issues to consider when making the offer:
7
1.
Put the offer of employment in writing (include the rate of pay, shift, etc).
2.
Attach a job description to the written offer and include a statement that training
will be provided, if appropriate.
3.
Include important information that may establish that the offer is for “suitable”
work — for example: provide notice that training will be available, identify all
licensure or education issues, indicate whether the employer is prepared to make
any necessary or special accommodations, etc.
4.
Specifically state the date and time the offer will expire. Also, indicate that a
failure to respond by the stated deadline will be considered a refusal of the offer
and will result in an automatic withdrawal of the offer.
The pay rate that is considered "suitable" is 70% of the gross pay rate before unemployment.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
5.
Give the claimant the name and phone number of the person they should contact to
accept or decline the offer. Also, give the name and phone number of an alternate
contact person in case the primary contact person is not available when the
claimant responds.
6.
Personally present the written offer of employment to the claimant, or send the
written offer by mail (with return receipt requested). Offers made by telephone
should be confirmed in writing and mailed (with return receipt requested) to the
claimant shortly after the offer is made.
7.
Provide the claimant a reasonable time to consider the position offered and a
reasonable time to respond. If the time period expires and you have not heard
from the employee, then send a letter (with return receipt requested) indicating that
the offer is being considered refused and withdrawn for the reason that the
employee failed to respond in a timely manner.
8.
Allow the claimant an opportunity to ask questions and inquire about the specifics
of the offered employment — this is especially important if the offer work is in
different department, requires new skills, requires the revitalization of previously
used skills, etc.
9.
If a claimant refuses an offer of suitable work from your organization, be sure to
obtain the reason for the refusal. Upon receipt of the reason, verbally repeat and
confirm the reason provided by the employee. Document the refusal date and
reason provided. If it is a reason that can be accommodated, then you consider
proper accommodation action [ie: later start time, specialized training, etc.].
Promptly send a letter confirming the refusal to the employee.
10.
Be prepared to offer and provide basic training or orientation to the claimant upon
acceptance of the offered employment.
11.
AND MOST IMPORTANTLY: If an offered position is refused or if unusual
circumstances arise, please contact the MHASC Unemployment Compensation
Program immediately. The MHASC Unemployment Compensation Program will
then contact the UIA and file the appropriate protest. Unless you contact us, it is
unlikely that the UIA will ever learn of the situation and we will not be able to
seek a disqualification from unemployment benefits.
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 MHASC UNEMPLOYMENT COMPENSATION PROGRAM
YOUR ORGANIZATION
Workforce Restructuring
Checklist of Unemployment Compensation Issues
1. Arrange meeting with the HR staff and the MHASC Unemployment Compensation Program to
explain the unemployment compensation process and the handling of special payments [ie:
allocated vacation pay, payment in lieu of notice, severance off-set, etc.].
2. Decision: How to handle special payments in conjunction with separation, which may have an
impact on unemployment claims? The special payments include: severance pay, salary
continuation, accrued vacation time [a/k/a: PTO, CTO, etc.], accrued sick time, payment of
wages in lieu of working notice, retirement benefits, or other related separation payments. This
is a subject that must be carefully examined early in the decision-making process. It is
highly recommended that you seek specific advice, consultation, and document review
from the MHASC Unemployment Compensation Program prior to final decision-making
and prior to issuing allocation notices to employees.
3. Decision: Provide “Unemployment Compensation Information” packets to affected
employees? Note: These packets are prepared by MHASC Unemployment Compensation
Program and include UIA Form 1711 [example packet can be provided].
4. State Requirement: Provide UA Form 1711 to each affected employee [contact the UCP to
obtain this form — which will be tailored for your specific organization].
5. Decision: Arrange group meetings with affected employees to discuss unemployment claims?
[conducted by MHASC Unemployment Compensation Program staff]
6. Discuss with Human Resources about the exchange of employment and wage information to
MHASC Unemployment Compensation Program for newly filed claims.
7. Contact Payroll Department to discuss transmission of wage information for new claims —
most recent six calendar quarters. Remove severance payments from future UIA wage reports.
8. Contact Finance Department to discuss potential unemployment liability and to estimate
potential liability:
 Emphasize that your organization is a “reimbursing” employer with the Michigan
Unemployment Insurance Agency.
 Liability will begin in the calendar quarter of lay-offs and may continue through the
following four calendar quarters. Highest quarters will be first and second after layoff.
Contact MHASC Unemployment Compensation Program for more information:
Neil A. Mac Vicar, Vice President
Direct Dial Telephone: (517) 886-8331 Cell Phone: (517) 749-2283
E-mail: nmacvicar@mha.org
NAM/UC/SHARED/ALLOCATEDPYMTS/MASTER/505
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