Does Taking out My 401k Affect My Unemployment in Ohio?

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Ohio offsets income from employee contributions to retirement accounts from unemployment benefits.
Ohio offsets income from employee contributions to retirement accounts from unemployment benefits. (Image: Jupiterimages/Photos.com/Getty Images)

Unemployment compensation pays benefits to people who lose their employment as a result of a layoff, furlough or other no-fault separation. Applicants for unemployment must meet certain eligibility requirements; they must actively seek employment and not earn wages during their compensation period. Unemployment benefits may be offset or denied if the person receives income, which may include some retirement pay.

Eligibility for Unemployment Benefits

To be eligible to receive unemployment benefits in Ohio a person must first meet minimum eligibility requirements by working for at least 20 weeks in the past year and have earned more than $4,200. Additionally, the person must be ready, willing and able to report for work if offered employment and not have been terminated from their prior employment for misconduct. While receiving benefits the person must also actively seek employment and report to the Office of Unemployment Compensation their efforts to find a job on a weekly basis.

Offsets Due to Income

Ohio law requires unemployment benefits be offset or denied if the applicant receives income as wages or from other sources. The offset is calculated by subtracting 20 percent of the current benefits from the weekly earnings of the applicant and then deducting that amount from their benefits. For example, if the applicant's weekly unemployment benefits are $400 and they earned $200 that week, the Ohio Office of Unemployment Compensation will deduct 20 percent of the benefit from the $200 earnings, which is $80, to determine an offset amount of $120. This $120 would be deducted from that week's benefits, thereby reducing the unemployment payment to $280.

Permissible Withdrawals From a 401(k) Account

Ohio unemployment laws do not regard cash withdrawn from savings accounts or the money collected from the sale of unappreciated assets as income subject to offset rules. These exempt funds include savings accounts or other investments. Since a 401(k) retirement account is a tax-protected savings account, an applicant for unemployment who makes an early withdrawal from her 401(k) account would not be disqualified from receiving unemployment benefits.

Disqualifying Retirement Income

Applicants for unemployment benefits may be denied compensation if they are retirement eligible and receive pension funds, social security benefits or make a retirement withdrawal from their 401(k) account. Under Federal and Ohio policy, unemployment compensation can not be treated as a supplement to retirement income.

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