Coordinating Workers Compensation & Social Security: The Inequity Among States Continues

Source: National Academy of Social Insurance

A recently published report by the National Academy of Social Insurance reflects that a "reverse offset" (coordination of benefits) still continues in 15 states. In reverse offset states, the insurance carrier gains the financial benefit of the coordination of benefits and NOT the Federal Social Security system. 

"If a worker becomes eligible for both workers’ compensation and Social Security disability insurance benefits, one or both of the programs will limit benefits to avoid making excessive payments relative to the worker’s past earnings. The Social Security amendments of 1965 require that Social Security disability benefits be reduced

15 (or “offset”) so that the combined totals of workers’ compensation and Social Security disability benefits do not exceed 80 percent of the workers’ prior earnings. 16 Some states, however, had established reverse offset laws prior to the 1965 legislation, whereby workers’ compensation payments are reduced if the worker receives Social Security disability benefits. Legislation in 1981 eliminated the states’ option to adopt reverse offset laws, but the 15 states that already had such laws in place were exempted. 17

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15 The portion of workers’ compensation benefits that offset (reduce) SSDI benefits are subject to federal income tax (IRC section 86(d)(3)).

16 The cap remains at 80 percent of the worker’s average earnings before disability, except that, in the relatively few cases when Social Security disability benefits for the worker and dependents exceed 80 percent of prior earnings, the benefits are not reduced below the Social Security amount. This cap also applies to coordination between Social Security disability insurance and other public disability benefits (PDB) derived from jobs not covered by Social Security, such as state or local government jobs where the governmental employer has chosen not to cover its employees under Social Security.

17 States with reverse offset laws are: Colorado, Florida, Hawaii, Illinois, Louisiana, Minnesota, Montana, Nevada, New Jersey, New York, North Dakota, Ohio, Oregon, Washington, and Wisconsin.

Click here to Read the complete report: Workers’ Compensation: Benefits, Coverage, and Costs, 2010

More Articles About The Offset

Court Rules Social Security Offset Not Barred by Time

Feb 26, 2011

A NJ Court of Appeals has ruled that the reverse-offset permitted under Federal law was allowed to be asserted by an insurance carrier years after an original workers' compensation judgment was entered. Even though the ...

http://workers-compensation.blogspot.com/

The Gift That Keeps Giving: The SSA Reverse Offset

Dec 01, 2009

Social Security (SSA) has been subsidizing a select group of States since 1981. The workers' compensation insurance carriers in only those select States are permitted to take a credit against SSA payments. The US Congress ...

http://workers-compensation.blogspot.com/

Workers' Compensation: Collecting Both Social Security Disability ...

Mar 23, 2008

In 1984 Congress amended The Social Security Amendments of 1956 and required that workers' compensation benefits were to be offset against the federal Social Security disability insurance benefit. In 1985 the offset was ...

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Governor Conditionally Vetoes NJ Supplemental Benefits Bill

The NJ supplemental workers' compensation bill has been conditional vetoed by NJ Governor Murphy. In the conditional veto message the Governor notes that the legislation's unintended consequences would jeopardize NJ's "reverse offset," shift the cost responsibility and not provide an economic benefit to the injured workers. The NJ Senate then took action.

Obama Administration Proposed Social Budget Cut Places More Stress on Workers' Compensation

It has been reported that the Obama Administration will soon propose budgetary cuts in social welfare programs. Those cuts may produce further economic stress on the nation's financially beleaguered workers' compensation system.

A reduction or rationing of medical care through Medicare will remove the safety net available to

injured workers who have been denied workers' compensation benefits initially and are delayed in the administrative/adjudicatory process.

In those states when there is a "reverse offset." the workers' compensation insurance carrier takes an offset when combined benefits exceed the ACE (Average Current Earning) before the onset of lost time, reduction of COLA (Cost of Livening Assessment) the carriers will be required to pay more dollars.

"President Obama next week will take the political risk of formally proposing cuts to Social Security and Medicare in his annual budget in an effort to demonstrate his willingness to compromise with Republicans and revive prospects for a long-term deficit-reduction deal, administration officials say."

Click here to read the complete article: "Obama Budget Reviving Offer of Compromise With Cuts" NYT

NJ Court Upholds Bar on Implementing Triennial Determination

Disability Benefits before age 62 are not entitled to a COLA (Cost of Linving) increase in benefits, a “triennial determination.” The Court reasoned that the 1980 NJ statute allowing for a “reverse offset,” one in which the employer takes the Social Security Disability Offset, also permits NJ law to pre-empt Federal law that mandates such a recalculation. 

Court Rules Social Security Offset Not Barred by Time

A NJ Court of Appeals has ruled that the reverse-offset permitted under Federal law was allowed to be asserted by an insurance carrier years after an original workers' compensation judgment was entered. Even though the employee pleaded that the insurance company had sat on its rights for years, and done nothing to assert the offset, the Court maintained that the insurance company was entitled to reclaim the benefits it had overpaid.

Since the information provided by parties to define the numerical offset was lacking, and the decision below lacked "specific reasons and analysis," the matter was remanded for further proceedings.

NJ is one of the states that elected to have the insurance company / employer take the offset under the options available in 1980. Most states allow Social Security to take the offset.

Gonzalez v Bristol-Meyers Squibb, 2011WL611722, Docket No. A-2187-09T3 (NJ App Div 2011)

Related articles

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• The James Zadroga 9/11 Health & Compensation Act of 2010 (workers-compensation.blogspot.com)
• The Gift That Keeps Giving: The SSA Reverse Offset

The Gift That Keeps Giving: The SSA Reverse Offset

Social Security (SSA) has been subsidizing a select group of States since 1981. The workers' compensation insurance carriers in only those select States are permitted to take a credit against SSA payments. 


The  US Congress legislated that if a State had a recognized Social Security Offset Plan in effect on February 18, 1981, then the SSA would not offset workers' compensation benefits to those injured workers. In those jurisdictions, the offset is taken by the workers' compensation insurance carrier, who gains the advantage.


It was recently estimated that that over 583,923 individuals were receiving Social Security Disability Benefits. Of those, 156,096 were eligible for an offset to be taken by SSA. But, of those, 44,748 or 28.7%, were eligible for a reverse offset to be taken instead by the workers' compensation insurance companies.


To read more about Social Security and workers' compensation click here.


Those States that have been designated as "reverse offset"States, and are permitted have  the workers' compensation carrier to take the credit are: California, Colorado, Florida, Louisiana, Minnesota, Montana, Nevada, New Jersey, New York, North Dakota, Ohio, Oregon, Washington and Wisconsin.

       

Collecting Both Social Security Disability Insurance And Workers’ Compensation Benefits Generates Inequality of Benefits

A recent study by the federal government reports that some disabled workers who receive workers' compensation or public disability benefits may receive less money than their counterparts. The reason why this phenomenon occurs is because the Social Security benefit computation is designed to replace more of the lower earner’s pre-retirement or predisability earnings than a higher earner’s.

“The Social Security benefit computation is designed to replace more of a lower earner's preretirement or predisability earnings (average indexed monthly earnings) than a higher earner's. This is done by "bend points" in the primary insurance amount formula, which create three earnings brackets. Earnings up to the first bend point are replaced at 90 percent; earnings between the first and second bend point, at 32 percent; and earnings above the second bend point, at 15 percent, up to the taxable maximum. The three brackets are a convenient way to group workers by income (represented here by AIME). This grouping also helps distinguish differences in replacement rates, which are largely determined by the earnings bracket in which the worker belongs.”

The Social Security disability system was established in 1956 to pay cash benefits to those workers who sustained long-term disabilities and were insured for coverage. On the other hand, state workers compensation systems had been in place since 1911 and may be combined with other public disability benefits in addition to Social Security benefits.

The Social Security system, unlike state workers compensation programs, provides a nationally distributed benefit to over 8 million disabled-worker beneficiaries. State public disability benefits are paid under numerous laws including federal, state or local government were plans that provide compensation for medical conditions that are not work related. Some of them may be short-term such as state temporary disability benefits.

As of December 2005, the date that the study utilized for collection of data, there were 8,305,702 disabled-worker beneficiaries in the Social Security program. Of those beneficiaries, 1,440,772 had some past or present connection to workers compensation or public disability benefits and 798,476 at a current connection to workers' compensation or public disability benefits.

In 1984 Congress amended The Social Security Amendments of 1956 and required that workers’ compensation benefits were to be offset against the federal Social Security disability insurance benefit. In 1985 the offset was eliminated and it was again reinstituted in 1989 by Congress. Further amendments in 1996 to The Omnibus Budget Reconciliation Act Of 1981 extended the offset provision to public disability benefit programs. However, Congress excluded the offsets of workers’ compensation and public disability beneficiaries who are receiving Social Security disability benefits in those states where the State took the offset. These have been named reverse offset states. The state law needed to be in effect as of February 18, 1981. Presently there are 16 states and Puerto Rico that are reverse offset states.

The recent study involving 18 month period from January 2003 through June 2004, identifies that a proximately 11% of all Social Security disability beneficiaries were also entitled to receive state workers compensation for public disability payments. It reported that those who receive combined benefits were most likely to be male, high earners, older it retirement and from the Western states.

The report concludes that the earnings replacement rate for disability insurance beneficiaries under the Social Security system, as measured by the ratio of the monthly disability insurance benefits to the average indexed monthly earnings, demonstrates that disabled workers without workers’ compensation or public disability benefits had higher replacement rates. Therefore, collecting multiple benefits may create an economic disparity.

Trump Administration Proposes Elimination of the Reverse Offset

The Trump Administration in its proposed FY 2020 Budget has proposed elimination of the workers’ compensation reverse offset. The elimination will act as a cost saving measure and will level the playing field for all workers’ compensation system throughout the United States.

Investigative Report Raises Issues

The tension between public pension systems and workers' compensation programs was highlighted in a recent investigative report by the NJ State Comptroller. The report raises additional critical issues common to other state and national collateral social insurance programs challenged by current fiscal limitations.

Rules Adopted to End NJ Pension Cost Shifting

The New Jersey Department of Labor and Workforce Development [DLWD] adopted Rules embracing the recommendations of  NJ State Comptroller concerning NJ State Pensions. A February 2021 investigative report by the NJ State Comptroller raised critical issues common to other state and national collateral social insurance programs challenged by current fiscal limitations. The rules are effective as of March 7, 2022.  54 N.J.R.448(a). The Rules were adopted without change and have retroactive application.

Rules Proposed to End NJ Pension Cost Shifting

The New Jersey Department of Labor and Workforce Development [DLWD] has proposed Rules that will adopt the recommendations of  NJ State Comptroller. A February 2021 investigative report by the NJ State Comptroller raised critical issues common to other state and national collateral social insurance programs challenged by current fiscal limitations. The deadline for written comments is October 15, 2021.

Is The Reserve Offset Heading for Extinction?

The Obama Administration is proposing stricter collection of workers' compensation payments data of Social Security beneficiaries.

Social Security-Budget Estimates and Related Information
Budget Overview, February 2015

"10. Establish Workers’ Compensation Information Reporting. Current law requires SSA to reduce an individual’s Disability Insurance (DI) benefit if he or she receives workers’ compensation (WC) or public disability benefits (PDB). SSA currently relies upon beneficiaries to report when they receive these benefits. This proposal would improve program integrity by requiring states, local governments, and private insurers that 23 administer WC and PDB to provide this information to SSA. Furthermore, this proposal would provide for the development and implementation of a system to collect such information from states, local governments, and insurers."

FY 2016 BUDGET OVERVIEW, p. 22
http://www.ssa.gov/budget/FY16Files/2016BO.pdf

With that information, the SSA can determine if the Federal Government is accurately calculating the Federal SSA/Workers' Compensation setoff.

 The obvious inequity, cost shifting, exists in those states where a reverse offset is taken. In those states, ie. NJ, the workers' compensation insurance company takes the offset credit, and NOT the Federal Government (SSA).

The collection and publication of this data will verify the inequity between States and the cost shifting to the Federal government in some states and not others.  A demand for the elimination of this inequity may result in the extinction of the Reverse Offset.

See:  The Gift That Keeps Giving: The SSA Reverse Offset

Related articles

• 2016 Budget Proposal Would Require Reporting of Workers' Compensation Benefits to Social Security Administration (workers-compensation.blogspot.com)
• CMS: "The Smarter Act" Introduced in the US Senate (workers-compensation.blogspot.com)

Watered down NJ supplemental benefits heads to the Governor

A watered-down version of the original NJ supplemental workers’ compensation benefits bill has been approved by the Legislature. It now heads to the NJ Governor Murphy for review.

Totally Injured Workers Maybe Getting an Increase in Benefits

The proposed Trump Administration 2019 Budget (p. 115) may allow NJ workers’ compensation beneficiaries to receive an increase in benefits. By eliminating the Social Security “reverse offset,” totally and permanently injured NJ workers will receive a triennial annual COLA increase.

“The Budget includes a re-proposal to eliminate reverse offsets in fifteen states where Workers' Compensation (WC) benefits and temporary disability insurance benefits (TDI) are offset instead of DI benefits."

Social Security Announces 5.9 Percent Benefit Increase for 2022

Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 5.9 percent in 2022, the Social Security Administration announced.

Incorrect Offset of Temporary Benefits

The incorrect offset of temporary Workers' Compensation benefits is not the basis for an interlocutory appeal ruled a NJ Appellate Court.

"Appellant Linda Scott appeals from a determination by the Judge of Compensation that her former employer, the County of Bergen (Bergen), is entitled to an offset pursuant to the provisions of N .J.S.A. 34:15-43 and N.J.S.A. 34:15-29, permitting Bergen to avoid the payment of temporary compensation benefits to appellant due to her receipt of an ordinary disability retirement pension from the Police and Firemen's Retirement System (PFRS). We dismiss this appeal as interlocutory because it does not present an issue that should be decided at this time and no application for leave to appeal was filed. R. 2:2-4.

"Leave to appeal was not sought nor does appellant argue such leave should be granted. Scott is receiving the ordinary disability pension; thus, the lack of additional funds from a temporary disability payment does not leave her destitute. This appeal neither presents a situation where the interests of justice require us to rule on the merits nor does it address a legal issue of general importance likely to recur often.

Scott v The County of Bergen, Not Reported in A.3d, 2011 WL 2651957 (N.J.Super.A.D.)

Long Overdue Public Safety Worker Coverage

Legislation has been reintroduced to provide workers’ compensation benefits for certain public safety workers who developed an occupational illness or injury flowing from the September 11, 2001, terrorist attacks. A closer look at the legislation reveals that it removes defenses such as causal relationship, statute of limitations, and jurisdiction. Complicated statutory and regulatory challenges may ultimately offset the benefits offered. 

Workers Compensation Beneficiary Challenges to ERISA Setoff Allowed

A US District Court has held that a workers’ compensation claimant is allowed to go forward with his challenge of a delayed setoff of workers’ compensation benefits. The ERISA plan administrator originally, in October 2004 determined that no offset of workers’ compensation benefits would be permitted based upon a specific loss date. In December 2007 the beneficiary was by the plan administrator that the date offset had been changed and that an offset would be required.

The injured worker instituted the action claim that the plan was estopped by the late chance of plan determination of the disability date.

Luppino v. Sedwick Claims Management Services, Inc., et al., Civil Action No. 08-cv-5315 (DMC-MF), 2010 WL 1999316 (D.N.J.), Slip Copy, Unpublished Opinion.

To read more about offsets and workers' compensation.
Click here for more information on how Jon L Gelman can assist you in a claim for workers' Compensation claim benefits. You may e-mail Jon  Gelman or call 1-973-696-7900.

2016 Budget Proposal Would Require Reporting of Workers’ Compensation Benefits to Social Security Administration

The Social Security Administration (SSA) has been vocal in the past about its difficulty in obtaining information about workers’ compensation benefits. The primary reason that the SSA has been seeking this information is to reduce social security benefits by way of an SSDI/WC offset. The SSDI/WC offset is a calculation used by the SSA to reduce a beneficiary’s SSDI benefit amount if the person is also receiving workers’ compensation benefits. The SSDI/WC offset is different in every state and applies only when the individual's combined monthly amounts of SSDI and workers' compensation are greater than 80% of individual's pre-disability "average current earnings.”

The SSA currently has to rely on beneficiaries to report to the SSA when they receive workers’ compensation or public disability benefits. President Obama’s 2016 budget proposal includes a provision to establish a new federal requirement that workers’ compensation and public disability benefit information be provided by states, local governments, and private insurers to the SSA.

The budget proposal summary includes the narrative below:

Establish Workers’ Compensation Information Reporting. Current law requires SSA to reduce an individual’s Disability Insurance (DI) benefit if he or she receives workers’ compensation (WC) or public disability benefits (PDB). SSA currently relies upon beneficiaries to report when they receive these benefits. This proposal...


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2018 Social Security Changes - COLA Increases

The Social Security Administration has announced based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2016 through the third quarter of 2017, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 2.0 percent COLA for 2018.