Opinion ID: 1919526
Heading Depth: 1
Heading Rank: 2

Heading: History of Wage-Loss Benefit Coordination Laws

Text: Workers' compensation is part of an employer-based system of wage-loss protection. The overall system of benefits by which an employer provides its employees with protection against loss of wages also includes unemployment compensation, nonoccupational sickness and disability insurance, and old age and survivors' insurance. 4 Arthur Larson, Worker's Compensation § 97.10 (1995). Despite the general recognition that these benefit devices are part of an overall system, the jerry-built character of American social legislation has resulted at many points in failure to anticipate and provide for appropriate coordination. Id. at § 97.20. As a result, duplication of benefits was quite common and led to legislative efforts to coordinate benefits. Wage-loss benefit coordination laws are designed to achieve a dual purpose: (1) to assure, when an employee suffers a wage loss because of disability, unemployment, advanced age or death, that a certain minimum portion of the employee's actual wages is continued or, in the case of death, that the employee's dependents receive some degree of recovery of lost support; and (2) to preclude an employee from contemporaneously collecting duplicative wage-loss benefits under different parts of the overall system of employer-based protection against loss of wages. Benefit coordination laws are based on the premise that an employee experiencing a period of wage loss should not be permitted to receive duplicative benefits from different parts of the overall system provided by the employer and thereby recover more than the amount of his or her actual wages. The theory is that an employee experiencing only one wage loss should be entitled to receive only one wage-loss benefit from the employer. Benefit coordination laws thus avoid duplicative benefits collected from the employer and prevent social legislation from becoming a grab bag of assorted, unrelated wage-loss benefits. 4 Arthur Larson, Worker's Compensation § 97.10 (1995). As early as 1956, Congress addressed the obvious overlap between state workers' compensation benefits and federal Social Security disability benefits. Concerned that such overlapping benefits would lead to an erosion of state workers' compensation programs and would reduce employees' incentive to return to work and thus impede rehabilitative efforts, Congress included in the initial Social Security disability benefits enactment a provision calling for a full offset of Social Security disability benefits if the employee was contemporaneously receiving workers' compensation benefits. Richardson v. Belcher, 404 U.S. 78, 92 S.Ct. 254, 30 L.Ed.2d 231 (1971). While that offset was quickly repealed in 1958, it was re-enacted in 1965 as part of a major amendment to the Social Security Act. Simply stated, the present federal statute requires that the amount of Social Security disability payments be reduced when the combined amount of such disability payments and the employee's workers' compensation benefits exceeds eighty percent of the employee's average current earnings. [3] 42 U.S.C. § 424a(a)(1991). By adopting an offset in the form of an eighty percent federal ceiling, Congress reduced the duplication inherent in the programs and at the same time allowed a supplement to workmen's compensation where the state payments were inadequate. Richardson v. Belcher, 404 U.S. at 83, 92 S.Ct. at 258. The federal offset statute was modified for a period of time by a provision in Section 424a(d) that the federal offset did not apply if the state workers' compensation law itself provided for an offset of Social Security disability benefits against state workers' compensation benefits in the event of an overlap. By this reverse offset provision, Congress allowed the states to provide a benefit for local employers by enacting such a provision, with no reduction in the overall benefits received by employees. [4] However, as part of a cost-cutting reform measure, Congress later imposed a cutoff date of February 18, 1981 for such state legislation. The effect of the cutoff date was to grandfather in existing state offset provisions enacted during the window period and to close the door to any subsequent state offset enactments. After the cutoff date, any legislation that added to or altered the scope of an existing state offset provision would not be recognized. 2 Social Security Law & Practice § 26:69 (M. Rosenhouse ed. 1987).