Workers' Compensation Pension Offset Actuarial Equivalency
Harrison v. Workers' Comp. Appeal Bd., PICS Case No. 17-1112 (Pa. Commw. June 28, 2017) Simpson, J.; (30 pages).
A workers' compensation judge properly calculated an employer's pension offset against workers' compensation benefits based on the maximum monthly amount of pension benefits the claimant could have received, even though claimant opted for a lower monthly rate to provide survivor benefits for his spouse. The court affirmed the decision regarding an offset of claimant workers' compensation benefits.
Claimant suffered a work injury in 2010. His employer accepted the injury in a notice of compensation payable. In 2012, employer issued a notice of workers' compensation benefit offset stating that based on information received from the Pennsylvania State Employees' Retirement System, employer was entitled to a pro-rata pension offset for benefits claimant received in the amount of $1,885 per month. Employer calculated the offset based on 34 Pa. Code 123.9(a) and found the weekly offset to be $434.34. Employer subtracted this amount from claimant's weekly compensation rate of $845 and reduced claimant's payment to $410.66. A workers' compensation judge denied claimant's review petition and the Workers' Compensation Appeal Board affirmed. On appeal, claimant argued that the board erred in affirming the decision that employer's offset should be calculated based on the maximum monthly amount of pension benefits he could receive where he opted for a lower monthly rate, which provided for survivor benefits for his spouse in the event of his death. SERS calculated claimant's maximum single life annuity at $3,742 per month. Claimant elected a different payment option which paid him a gross monthly amount of $3,434. After deduction, he received an initial net monthly payment of $3,053. He relied on Section 204(a) of the Workers' Compensation Act, which says that "the benefits from a pension plan to the extent funded by the employer directly liable for the payment of which are received by an employee shall also be credited against the amount of the award made under [the Act]." According to claimant, the board erred in holding that employer could apply the offset against the amount he could have received if he elected to receive the single life annuity rather than the amount he received. Section 204(a) focuses on the extent to which benefits are funded by an employer, the court observed. In exchange for a reduction in the amount of pension payments to himself, claimant added his wife as a joint annuitant with a right of survivorship. Thus, while claimant received a reduced annuity payout under the option he chose, the remainder of his MSLA would fund the survivor benefits for his spouse. Thus, claimant's pension benefits under the payout option he chose remained the actuarial equivalent to his MSLA. Claimant did not offer any evidence to challenge employer's expert testimony on actuarial equivalency. The court rejected claimant's argument that an employer is only entitled to an offset based on the monthly net amount of pension benefits a claimant physically receives. Thus, there was no error or abuse of discretion in the determination that claimant's joint and survivor annuity constituted a benefit claimant constructively received for purposes of Section 204(a) pension offset. In a dissenting opinion, both Judges Wojcik and Cosgrove agreed with claimant's assertion that the WCJ erred in calculating the offset based on the maximum amount of benefits claimant could have received rather than what he did receive.