See SOCIAL SECURITY DISABILITY OFFSET Cost of living increases
EVELYN E. BERLIN ) DOCKET NO. 863615
CLAIM NO. G-702510 ) DECISION AND ORDER
APPEARANCES:
This is an appeal filed by the claimant on October 8, 1986 from an order of the Department of Labor and Industries dated September 19, 1986 which affirmed a prior order of April 7, 1986 which reduced time- loss compensation to $390.75 per month in accordance with RCW 51.32.220 because of disability benefits received from the Social Security Administration, to begin May 1, 1986, and demanded reimbursement for overpayment of previous awards for the six month period of December 1, 1985 to April 30, 1986 inclusive in the amount of $1,290.48. Reversed and remanded.
Pursuant to RCW 51.52.104 and RCW 51.52.106, this matter is before the Board for review and decision on a timely Petition for Review filed by the claimant to a Proposed Decision and Order issued on March 11, [2] 1987 in which the order of the Department dated September 19, 1986 was affirmed.
The Board has reviewed the evidentiary rulings in the record of proceedings and finds that no prejudicial error was committed and said rulings are hereby affirmed. We wish, however, to clarify the record with respect to the agreement in the parties' stipulation that "the Department letter from the claim of Velma McCann be admitted." No such document was ever received at the Board nor was it offered by either party at the hearing held on February 6, 1987 during which the parties agreed to the admission of Exhibits A through K and rested. As a consequence, that document is not part of the record before us.
This appeal presents the question of what dates should determine the level of state and federal benefits for purposes of calculating the reverse offset allowed pursuant to RCW 51.32.220. Ms. Berlin contends that August 1975, the date of her initial entitlement to concurrent state and federal benefits, is the determinative date for both state and federal benefits. She further argues that no offset should be taken because, as of that date, the combined amount that she was receiving was less than 80% of her "average current earnings" and thus protected from offset by both RCW 51.32.220(1) and 42 U.S.C. 424a. Her argument is based on her contention that state and federal cost of living increases accruing after the initial entitlement to concurrent benefits cannot be included in the level of benefits used in the offset computation. Thus she challenges the Department's calculation of the offset based on the state and federal benefit levels (including state and federal cost of living increases since August of 1975) as of May 1, 1986, the effective date of the offset. [3]
Ms. Berlin filed a claim for worker's compensation benefits on February 25, 1975. Time-loss compensation benefits were commenced on March 7, 1975, retroactive to February 5, 1975. She did not begin receiving social security disability payments until July 1978, retroactive to August 1975. Her time-loss compensation had been terminated one year earlier, in July 1977, and her state claim was ultimately closed on April 22, 1980 without further award for time-loss compensation. She was entitled to concurrent state and federal periodic benefits from August 1975 to May 20, 1976 and again from April 22, 1977 through July 22, 1977.
Ms. Berlin continued to receive monthly social security disability benefits and in February 1984 filed an application to reopen her state claim for aggravation of condition. the Department denied that application, requiring Ms. Berlin to litigate the question of whether her claim should be reopened. She was ultimately successful and the claim was finally reopened on June 25, 1985, with time-loss compensation reinstated as of February 16, 1984. Thus Ms. Berlin again became entitled to concurrent state and federal periodic benefits. Due to state and federal cost of living increases subsequent to August 1975, her combined benefits now exceeded 80% of her average current earnings and effective May 1, 1986 the Department began to offset her time-loss compensation benefits based on the state and federal benefit levels as of that date.
The roles of state and federal cost of living increases in the offset computation must be addressed separately since different rules apply. It is clear that state cost of living increases are to be included in the offset computation. Indeed, the offset is to be [4] recalculated whenever a state cost of living increase raises the state benefit level. 20 C.F.R. 404. 408(k); 70A Am Jur 2d ] 247. Two Social Security Administration rulings support this view. SSR 80-14; SSR 82- 68. In SSR 82-68 the Social Security Administration made the following policy statement:
"All increases in public disability benefits [state benefits] after offset is first considered or imposed should be considered in the computation of the DIB [federal benefits] reduction and will result in the imposition of an additional offset where appropriate. Although this issue was not specifically addressed in section 224 of the Act, it is consistent with the intent of Congress to limit combined public disability benefits and DIB.
Each subsequent increase in the public disability benefit after offset is imposed may result in a further reduction of Federal disability benefits." SSR 82-68 at 895.
The status of federal cost of living increases is not so clear.
42 U.S.C. § 424a(7) and (8) provide:
"In no case shall the reduction in the total of such benefits under sections 223 and 202 [42 U.S.C.S. §§ 402 and 423] for a month (in a continuous period of months) reduce such total below the sum of
(7) the total of the benefits under sections 223 and 202 [42 U.S.C.S. §§ 402, 423], after reduction under this section, with respect to all persons entitled to benefits on the basis of such individual wages and self-employment income for such months which were determined for such individual and such persons for the first month for which reduction under this section was made (or which would have been so determined if all of them had been so entitled in such first month) and
(8) any increase in such benefits with respect to such individual and such persons, before reduction under this section, which is made effective for months after the first month for which reduction under this section is made." [5]
This language would seem to protect federal cost of living increases subsequent to the date of first offset from further reduction.
In addition, however, 42 U.S.C. 424a(d) provides:
"The reduction of benefits required by this section shall not be made if the workmen's compensation law or plan under which a periodic benefit is payable provides for the reduction thereof when anyone is entitled to benefits under this title on the basis of the wages and self-employment income of an individual entitled to benefits under section 223 [42 U.S.C.S. § 423]." (emphasis added)
Three jurisdictions have excluded federal cost of living increases entirely from the offset computation. The court in McClanathan v. Smith, 606 P.2d 507 (Mont. 1980) interpreted the language of section 424a(d) as limiting the state offset to "benefits under section 423" (i.e., the primary insurance benefit) and as excluding all cost of living increases under 42 U. S. C. 415(i)(1). In Great Atlantic & Pacific Tea Co. v. Wood, 380 So. 2d 558 (Fla. 1980) the court construed state statutory language to exclude federal cost of living increases from the offset computation. The applicable statutory language there was:
"However, this provision shall not operate to reduce an injured worker's benefits under this chapter to a greater extent than they would have otherwise been reduced under 42 U.S.C. paragraph 424(a)." Great Atlantic at 558.
The third jurisdiction, Colorado, excluded federal cost of living increases based on a determination that the state statutory language permitting an offset based on "periodic disability benefits granted by the federal old-age survivors, and disability insurance act" did not include federal cost of living increases within the phrase "periodic [6] disability benefits." Engelbrecht v. Hartford Acc. & Indem. 680 P. 2d 231 (Colo. 1984).
While somewhat persuasive, these decisions from other jurisdictions are obviously not binding precedent. Furthermore, there is somewhat conflicting authority to be found at 70A Am Jur 2d § 246 which reads:
"Events occurring after the initial reduction may cause the Social Security benefits due a worker and his family to increase. The offset cannot serve to reduce any such increase which occurs after the initial reduction. Thus, in any case where benefits are increased after the initial reduction, the amount of offset is not recalculated to take into account that increase. Any increase is simply added to what amount, if any, is payable. However, the Social Security Administration will not protect increases in Social Security benefits from offset if there is a new and separate workers' compensation award or a break in the worker's entitlement to workers' compensation benefits. If, for example, a worker received the full amount of compensation benefits due him and subsequently becomes entitled to workers' compensation benefits again because of a worsening in his condition, the SSA will recompute the offset, and any increases to that worker's Social Security disability benefits effective prior to the month offset is reimposed will not be protected." (emphasis added)
For authority regarding the latter proposition, the Social Security Administration, Program Operations Manual System, § DI 00203.345 is cited.
We note that the appeal before us involves similar facts, i.e., reinstitution of state time-loss compensation benefits because of a worsening of condition. However, the example given at 70A Am Jur 2d § 246 also involves a distinguishing factor - prior to the break in workers' compensation benefits an offset had been taken. In the instant appeal, no offset could have been taken in August 1975 when Ms. [7] Berlin first became entitled to both state and federal benefits because her combined benefits did not exceed 80% of her "average current earnings" as required by 42 U.S.C. § 424a.
Exhibit I indicates that the Social Security Administration considered taking an offset at that time but concluded: "Your present workmens' compensation payments require no adjustment in your monthly social security benefits because of a recent change in the Washington State Workmens' Compensation Law." Despite the ambiguity of this language, it is clear that the Social Security Administration would have been entitled to take an offset retroactive to August 1975 if Ms. Berlin's combined benefits had been sufficient, which they were not.
This distinguishing factor is critical to our decision. For SSR 82-68 makes the following policy statement:
"Where offset was previously considered but not imposed because the combination of public disability benefits state benefits and DIB [federal benefits] did not exceed the 80 percent limit (or total family Social Security benefit, where applicable) such increases in the public disability benefit could, of course, result in the initial imposition of offset." (Emphasis added)
This is precisely the situation in the instant appeal. The import of this policy statement is clear. Where no offset could be taken when the worker first became entitled to concurrent benefits because the combined state and federal benefits were less than 80% of the average current earnings, a future offset can only be taken in the event state cost of living increases have increased the combined benefits so that they exceed the 80% limit. Federal cost of living increases cannot be [8] considered to increase combined benefits to the point where an offset can be taken.
For all of the foregoing reasons we therefore conclude that the Department should have computed the reverse offset pursuant to RCW 51.32.220 based on the social security benefit level of August of 1975, excluding subsequent federal cost of living increases, and based on the state time-loss compensation benefit level of May 1, 1986, including state cost of living increases which had accrued since August of 1975. We leave it to the Department to determine whether and when, based on those benefit levels, an offset can in fact be taken.
1. On February 25, 1975 Evelyn E. Berlin filed an accident report with the Department of Labor and Industries alleging that she had sustained an injury during the course of her employment with Swains General Store on February 5, 1975. The claim was allowed and on April 22, 1980 the Department issued an order closing the claim with a permanent partial disability award equal to 10% as compared to total bodily impairment and with time- loss compensation as paid through July 22, 1977.
On February 28, 1984 the claimant filed an application to reopen her claim for aggravation of condition and on June 25, 1985, after litigation, the Department issued an order reopening the claim effective February 16, 1984. On April 7, 1986 the Department of Labor and Industries issued an order reducing the claimant's time-loss compensation payments to $390.75 per month in accordance with RCW 51.32.220 because of disability benefits received from the Social Security Administration, to begin May 1, 1986, and demanding reimbursement of an overpayment of previous awards for the six month period of December 1, 1985 to April 30, 1986 inclusive, in the amount of $1,290.48.
On April 8, 1986 and April 10, 1986 the Department issued further orders adjusting claimant's rate of time-loss compensation for periods through April 30, 1986. On May 7, 1986 claimant filed a protest and request for reconsideration to the Department's orders dated April 7, 1986, April 8, 1986 and April [9] 10, 1986. On August 11, 1986 the Department issued an order closing the claim with no additional permanent partial disability award and an order adhering to the provisions of the Department's order dated April 7, 1986.
On August 29, 1986 claimant filed a notice of appeal with the Board of Industrial Insurance Appeals from the Department orders dated August 11, 1986. This appeal was docketed under Docket No. 86 3121. On September 11, 1986 the Board issued an order returning the case to the Department for further action and on the same date the Department issued an order holding its order of August 11, 1986 in abeyance.
On September 15, 1986 the Department issued an order setting aside and holding for naught the Department order dated August 11, 1986 closing the claim. On September 19, 1986 the Department issued an order affirming its order dated April 7, 1986.
On October 8, 1986 the Board received a notice of appeal from the claimant from the Department order dated September 19, 1986 which was assigned Docket No. 86 3614. On October 23, 1986 the Board issued an order granting the appeal and directing that hearings be held on the issues raised by the appeal.
2. Evelyn Berlin sustained an industrial injury on February 5, 1975 while in the course of her employment with Swains General Store. The claim was allowed and benefits were provided, including time-loss compensation which was paid for the periods of February 5, 1975 through May 20, 1976 and for the period of April 22, 1977 through July 26, 1977. The claim was closed on April 22, 1980 with time-loss compensation as paid.
3. On July 3, 1978 the Social Security Administration determined that claimant was entitled to social security disability benefits, retroactive to August 1975, with an initial monthly payment of $198.60. The Social Security Administration had notice of claimant's entitlement to concurrent state time- loss compensation benefits and considered taking an offset pursuant to 42 U.S.C. § 424a. However, as of August 1975, when claimant first became entitled to concurrent state time-loss compensation and federal social security disability benefits, the combined total of those benefits was less than 80% of her average current earnings ($11,606.25) and no offset could be taken. [10]
4. Ms. Berlin has continued to receive periodic monthly social security disability benefits since August 1975, along with associated cost of living increases.
5. On June 25, 1985, Ms. Berlin's state claim was reopened effective February 16, 1984 because of worsening of her condition. Time-loss compensation was recommenced as of February 16, 1984 and was paid continuously through May 1, 1986.
6. Claimant's time-loss compensation payments have increased due to cost of living increases since the initial date of entitlement, February 5, 1975.
It is so ORDERED. [11]
Dated this 5th day of October, 1987.
BOARD OF INDUSTRIAL INSURANCE APPEALS
/s/_____________________________________
SARA T. HARMON Chairperson
/s/_____________________________________
FRANK E. FENNERTY, JR. Member
/s/_____________________________________
PHILLIP T. BORK Member