How will taking a pension hurt unemployment benefits?


Q. I’m collecting unemployment benefits because my job cut my position because of COVID-19. Now my ex-employer wants me to take my pension in one of two ways: a lump sum or monthly. Will this stop my unemployment benefits if I accept either one?
— Not working

A. We’re sorry to hear about your job loss but it’s good to know you will have pension income in your future.

When you receive pension income, it is possible that your unemployment claim will be affected.

Your claim may be reduced by either 50% or 100% of your weekly pension amount if you are receiving a pension from the employer that your unemployment claim is based on, said Ken Van Leeuwen, a certified financial planner with Van Leeuwen & Company in Princeton.

It all depends on who made the contributions to the pension plan, he said.

“If your employer contributed the entire amount toward your pension, and you did not contribute anything, your benefits may be reduced by 100% of the weekly pension amount,” he said. “On the other hand, if you did make contributions toward the pension along with your employer, your benefits may be reduced by only 50% of the weekly pension amount.”

It’s also possible there will be no reduction at all if you contributed the entire amount towards the pension, and your employer contributed nothing., Van Leeuwen said

“In the case of receiving a lump sum, if you were involuntarily separated from work prior to age 59 1/2 and you receive a lump sum payment of your retirement pension, your unemployment benefits will be reduced in the week the payment was received,” he said. “You do have the option to prorate the reduction weekly, which is done using actuarial tables.”

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This story was originally published on April 29, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.