MSAs & WC Offsets - A Collegial Consult
Saturday, March 28th, 2009“I settled a workers’ compensation case for a client several years ago. She injured her knee and had surgery. Now she has just been approved for SSD for a different medical condition. Will Social Security take an offset when the claims were based on different injuries?”
“Yes,” I answered. My colleague was operating under the common misconception that the injury which is the foundation of the WC claim affects whether Social Security will take an offset. If one recalls the reason for the WC offset, the answer is more intuitive.
The offset was created to prevent a worker from collecting both SSD and WC benefits and, thus, receiving more in total disability benefits than the income she received when she was working. The belief behind the rule is that the receipt of benefits exeeding prior income would create a disincentive to medical recovery and return to gainful employment. If that is the purpose, then the indentity of the injuries underlying the claims is clearly of no relevance.
“If that’s the case, should I have included offset language in the Compromise & Release Agreement? I didn’t. She told me she was going back to work and she did. Does that mean my client’s SSD will be reduced?”
“Probably not,” I answered. “It depends on how the numbers work out. But, if the case settled several years ago, the offset has probably already been exausted.” When we crunched the numbers, the offset had, in fact, expired before the first month of the client’s entitlement to SSD benefits.
Remember, Social Security’s “default” calculation for an offset is to convert the last effective weekly rate into a monthly amount. If that rate was the client’s total disability rate, as it often is when a WC case settles, then the resulting credit period (monthly rate divided into net settlement amount) is usually 2-3 years.
When we use the lifetime proration language pursuant to Sciarotta v. Bowen and POMS DI 520001.555 (C) (4), we are manipulating the credit period to affect a reduction in the monthly offset rate. While using this language is generally safe, it is not always the best option. If it is not anticipated that the worker might be going on SSD until several years after the settlement, it might be better to choose the “default” calculation and eliminate the offset credit more quickly.
That possiblity is especially true when we recall that the Social Security Administration has historically expressed disfavor for the lifetime proration method and has attempted to eliminate that method on numerous occasions. If one factors in uncertainty regarding the future viability of the lifetime proration method, early elimination of the credit period becomes an even more compelling option.
“Well, if Social Security doesn’t care about whether the work injury and the disabiling condition are the same, then did we need to consider an MSA, or do an informal set-aside? I didn’t put that in the agreement either.”
“No,” I replied. But not for the reason my colleague was considering. First, his client’s case did not meet any of the criteria set forth by CMS as requiring a formal MSA. Second, unlike the offset rule, the need for an MSA is dependent upon the nature of the accepted work injury, very dependent. In the case of this colleague’s client, she had undergone surgery and had not had any treatment for the knee for some time. The purpose of an MSA is to protect Medicare from an inappropriate transfer of work related medical expenses from WC to Medicare. Because the client’s treatment for the work related injury had concluded, no inappropriate transfer could occur and no informal MSA was needed.
