When Connie Alger was laid off from her job as a tour guide, she applied for unemployment benefits.

She was eligible to collect $135 a week.

She wound up with $16 a week instead.

Why? Connie ran into a little-known provision in Rhode Island law that essentially penalizes the unemployed if they also happen to be collecting a Social Security benefit. It generally works like this:

When you apply for unemployment compensation, the state first looks to see if you get something from Social Security, too.

If you do, the state deducts half of your Social Security benefit from the amount of unemployment compensation that you'd normally be eligible to receive.

It doesn't matter how long you've worked. It doesn't matter how much you may need the money.

The fact is that Rhode Island punishes Social Security beneficiaries when it comes to unemployment benefits. They end up receiving less in unemployment compensation simply because they've worked a lifetime and are receiving a little something from Social Security as a result.

Rhode Island is one of only seven states that "offset" Social Security benefits against unemployment benefits, according to a survey by AARP, a membership and lobbying organization for people 50 and older. Most states have done away with the offset, or have passed legislation that will eliminate it, said Clare Hushbeck, an economist for state issues at AARP in Washington, D.C.

The offset ends up "drastically reducing or entirely eliminating unemployment benefits for tens of thousands of older workers" nationwide, according to an AARP report.

To make matters worse, few people know about the policy. "The Social Security offset comes as a shock to workers who go down to the unemployment office only to find that much-needed benefits will not be available to them," the AARP said.

That's what happened to Connie Alger. She told me about it when I dropped by her home in North Kingstown, a cozy duplex where she lives with her apricot standard poodle, named Sam, and her Himalayan cat, Clyde.

As some jazz played softly in the background in her living room, she told me what had occurred:

After working most of her life as an accountant for a number of firms, she retired, in February 2005.

A few months later, she decided to go back to work, part-time, mainly because she was bored and wanted a change of pace, she said.

Connie, 69, wound up with a seasonal job as a tour guide in Newport. When she was laid off, she applied in January, over the phone, for unemployment compensation.

"The people that I dealt with there all were very personable," she said. The application process went "very smoothly."

But then something strange happened. In early February, the state mailed her a notice. She showed me a copy. It said she was eligible for unemployment benefits, but she was also collecting Social Security benefits.

State law essentially says that if you draw Social Security benefits, you cannot collect a full unemployment benefit at the same time, the notice pointed out.

Instead, your unemployment compensation must be reduced by an amount equal to half your Social Security benefit.

Connie says that's unfair, and she's right. After all, she was eligible for $135 in weekly unemployment benefits, so that's what she should have been paid.

But she also happened to be receiving the weekly equivalent of about $237 in Social Security retirement benefits.

So the state reduced her $135 unemployment benefit by $119 (half her Social Security benefit).

That's how she wound up getting $16 a week in unemployment compensation.

When she received the state's notice, "I was angry, to a point," she said. But she also laughed -- the sort of hoot that can bubble up when you're faced with the absurd.

Rhode Island "should not penalize me because I'm on Social Security," she said. After all, employers pay for the unemployment program in the form of a tax on their payrolls. And she should know: "I wrote the checks for 40 years," as an accountant for various businesses, she said.

So when employees are laid off, they should be able to collect in full, "without any penalty for Social Security," she said.

That's the position the AARP takes. Older workers who have earned Social Security and unemployment compensation deserve to receive both, the group says.

That's especially true for workers who take early retirement. Chances are they need to supplement their Social Security with earnings from a job -- or from unemployment compensation if they lose their job, Hushbeck said.

"Depriving them of unemployment compensation at a point in their lives when they need to build up, not deplete, retirement assets is not only illogical and punitive, it could mean the difference between self-sufficiency and dependency," the AARP says.

The AARP has campaigned nationwide to get rid of the offset. Since the effort began in 2002, at least a dozen states -- including Rhode Island's neighbors, Connecticut and Massachusetts -- have done away with the offset or have moved to abolish it, Hushbeck said.

Connie read about the AARP's efforts in an issue of the AARP Bulletin. She's been waging her own little battle here ever since.

She's sent e-mail messages to anyone she feels can help change the policy. She's also contacted her legislators. "I've been a certified pain," she says with a laugh.

A bill to end Rhode Island's Social Security offset was introduced in the General Assembly earlier this year -- in the House by Rep. Thomas C. Slater, D-Providence, and in the Senate by Sen. Frank A. Ciccone III, D-Providence.

Neither measure passed. The House Labor Committee recommended that the proposal be held for further study. (The state Department of Labor and Training was neutral on the proposal, meaning it neither favored nor opposed it, said Raymond A. Filippone, an assistant director of the agency.)

Connie Alger isn't giving up. "I'm going to do what I can to get it changed," she said. She hopes others will, too. "The next step is to encourage our [state legislators] to re-evaluate those bills and reconsider passing them," she said. "Then our seniors would get their full benefit, rather than having it reduced."

The AARP plans to continue its campaign in Rhode Island, too. "We don't give up just because we don't make it in the first year," Hushbeck said. Eliminating the offset would be fair public policy, she said. "This is the right thing to do," she said.

Connie Alger returned to work in April. But for the three months or so that she was out of work and collecting unemployment, she reckons she lost out on about $1,550. That's the difference between what she actually collected in unemployment compensation and what she should have collected but for the offset.

It's money she could have used to help pay heating and electric bills and other expenses. Instead, she had to turn elsewhere to cover the costs. "It came out of my savings," she said.

"Don't misunderstand me," she said. "It's not [that] I'm so concerned about myself. I didn't starve or anything. But there are other people in need . . . suffering through the same thing, and I don't know that they're as fortunate."

Some things in life you have to accept, but the offset isn't one of them. "It just burns my bottom. It just isn't fair," she declared.

Unemployment insurance and Social Security are two separate programs. Workers help pay for both, one way or the other.

You shouldn't have to take a cut in unemployment benefits just because you also receive Social Security benefits. That's unjust. The rule should be scrapped. Not just for Connie Alger, but for the thousands of other Social Security beneficiaries in Rhode Island, too.

TODAY'S TIP: For more information about Rhode Island's unemployment insurance program, call (401) 243-9100, or use this Web site:

www.dlt.ri.gov/ui

In the General Assembly, House bill 7451 and Senate bill 2902 would have eliminated the offset. To read the measures, use this General Assembly Web site:

www.rilin.state.ri.us

(Follow the "Bill Status/History" links, then enter the bill number.)

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline@projo.com

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