A. PR 09-134 Minnesota Workers’ Compensation (WC)-Treatment of “Sub 7” Payments for Offset Purposes—REPLY Our Ref: 09-0143-NC

DATE: July 13, 2009

1. SYLLABUS

Subdivision 7 fees, under Minnesota law, are treated as partial reimbursement to the employee for his attorney fees. Accordingly, for offset purposes, the excludable attorney fee expenses should be reduced by the amount of the subdivision 7 fees. It should not be construed as a penalty to the employer for failing to provide timely WC payments.

2. OPINION

You asked for a legal opinion on the proper treatment of “subdivision 7 payments,” or fee reimbursements under Minn. Stat. § 176.081, subd. 7, when computing offset due to the receipt of Minnesota workers’ compensation (WC) benefits. Specifically, you want to know whether the excludable attorney fee expense should be reduced by the amount of the subdivision 7 payments, or whether the subdivision 7 payments constitute “penalties paid by the employer or WC payer to the individual for failing to provide timely WC payments” which would not be considered WC for offset purposes under POMS DI 52105.015. For the reasons discussed below, we conclude that the subdivision 7 payments are considered as reimbursement to the employee for attorney fees already paid. Thus, the excludable attorney fee expense should be reduced by the amount of the subdivision 7 payments.

BACKGROUND

On July 24, 2004, Thomas L. N~, the claimant, was involved in a motor vehicle accident while working as a truck driver. The claimant was awarded SSA disability benefits effective January 2005.

The claimant filed a WC claim petition on August 30, 2004. On February 24, 2005, a Minnesota WC compensation judge ordered the payment of medical benefits and temporary total disability benefits to the claimant. The order stated that, from the temporary total disability benefits, “the insurer shall deduct the statutory attorney’s fee and pay the fee directly” to the claimant’s attorney. It further stated that “the insurer shall pay the partial reimbursement of attorney’s fees provided for in Minn. Stat[.] Sec. 176.081 Subd. 7.”

The claimant filed another WC claim petition on June 7, 2006. On April 18, 2009, a Minnesota WC compensation judge issued an award on stipulation approving the parties’ stipulation for settlement. The stipulation stated that, pursuant to the February 24, 2005 order, the employer and insurer had paid to the claimant $68,422.04 in temporary total disability benefits for the period July 24, 2004-July 24, 2006. As part of the settlement, these benefits were reclassified as permanent total disability benefits. The parties agreed that the claimant received $25,000.00 in permanent total disability benefits no later than April 15, 2005. As of that date, the employer and insurer were entitled to an offset, and the Social Security Administration (SSA) would no longer be entitled to an offset.

The stipulation further stated that the claimant had received $59,220.90 in permanent partial disability benefits/impairment compensation for the period July 25, 2006-April 5, 2008. The parties agreed that the employer and insurer would continue to pay these benefits through May 1, 2008, amounting to an additional $2,632.04. In addition, the employer and insurer would pay the claimant a lump sum payment of $23,690.90 in full, final, and complete satisfaction of his permanent partial disability claim.

Also, the employer and insurer would pay the claimant a lump sum payment of $61,852.04, representing permanent total disability benefits for the period July 25, 2006-May 1, 2008, less $5,000.00 in attorney fees. The employer and insurer would also pay $10,797.11 in attorney fees. These payments of attorney fees would be made in full satisfaction for legal services rendered through the date of the award on stipulation.

Beginning May 2, 2008, the employer and insurer would pay ongoing permanent total disability benefits at a rate of $658.01 per week (the compensation rate). The employer and insurer would offset these benefits due to the claimant’s receipt of Social Security benefits.

Finally, the parties agreed that the employer and insurer would pay the claimant subdivision 7 fees based upon the attorney fees awarded pursuant to the stipulation for settlement.

DISCUSSION

The Social Security Act (Act) limits the amount of disability insurance benefits (DIB) an individual may receive when simultaneously receiving WC benefits. See 42 U.S.C. § 424a(a); 20 C.F.R. § 404.408(a). When an individual’s combined DIB and WC benefits exceed 80 percent of his average current earnings, the Act requires a reduction, or offset, in DIB. See 42 U.S.C. § 424a(a); Berger v. Apfel, 200 F.3d 1157, 1159 (8th Cir. 2000). In order to prevent an individual from being subjected to offsets from both the state and the federal government, the federal offset does not apply where state law allows an employer to take a “reverse offset.” See 42 U.S.C. § 424a(d). Minnesota is one such state. After a Minnesota worker receives $25,000 in weekly permanent total disability WC benefits, SSA pays the full DIB amount while the employer reduces its WC payments to the injured employee, paying only enough to meet the 80 percent ceiling. See Minn. Stat. § 176.101, subd. 4; Sunde v. Barnhart, 417 F.3d 986, 987-88 (8th Cir. 2005).

In addition, certain expenses are “excluded,” or essentially deducted, from the offset computation, including “[a]mounts paid or incurred, or to be incurred, by the individual for medical, legal, or related expenses.” 20 C.F.R. § 404.408(d). Minnesota Statutes § 176.081 governs the calculation of attorney fees in WC claims and provides for a contingent fee for the recovery of monetary benefits of 25 percent of the first $4,000 and 20 percent of the next $60,000 of compensation awarded. See Minn. Stat. § 176.081, subd. 1(a). Subdivision 7 of § 176.081 provides that if the employer or insurer unsuccessfully resists a claim and the employee hires an attorney who successfully procures payment, an additional award may be assessed against the employer or insurer to the employee, an amount equal to 30 percent of that portion of the attorney fees which have been awarded that is in excess of $250.

Initially, we note that in this case, reverse offset may apply to the claimant’s receipt of permanent total disability WC benefits, pursuant to Minn. Stat. § 176.101, subd. 4. The April 2008 award on stipulation approved the reclassification of the claimant’s receipt of temporary total disability benefits for the period July 24, 2004-July 24, 2006, as permanent total disability benefits. Such retroactive reclassification is permissible under Minnesota law. See Sundby v. City of St. Peter, 693 N.W.2d 206, 211 (Minn. 2005) (temporary total disability benefits can be reclassified as permanent total disability benefits by stipulation of parties and will count toward $25,000 cap); see also POMS DI 52120.130(B)(3) (Minnesota WC payments made under initial award of temporary total disability may be considered payments for permanent total disability and counted toward $25,000 cap based upon decision of a WC judge). As you indicated, the claimant began receiving SSA disability benefits in January 2005. Therefore, for the period before the $25,000 permanent total disability cap was reached, i.e., January 2005-April 15, 2005, the SSA offset applies. For the remainder of this period, i.e., April 16, 2005-July 24, 2006, reverse offset may apply. For the period July 25, 2006-May 1, 2008, the claimant received permanent total and permanent partial disability benefits; reverse offset may apply. Finally, beginning May 2, 2008, the claimant received ongoing permanent total disability benefits; reverse offset may apply.

Turning to the subdivision 7 fees, under Minnesota law, such fees are treated as reimbursement to the employee for his attorney fees. See Irwin v. Surdyks Liquor, 599 N.W.2d 132, 144 (Minn. 1999) (subd. 7 fees characterized as “attorney fee reimbursement to the employee”); Kirchner v. County of Anoka, 410 N.W.2d 825, 830 (Minn. 1987) (subd. 7 fees are paid by insurers to employee for reimbursement of attorney fees); Robinson v. Minn. Valley Improvement Co., 401 N.W.2d 68, 73 (Minn. 1987) (employer/insurer was required to pay to employee 25 percent of his legal fees in excess of $250; statute provided that employee shall be awarded a portion of his attorney fees); Mack v. City of Minneapolis, 333 N.W.2d 744, 747 (Minn. 1983) (under subd. 7, “employer may be required to reimburse an injured employee for a portion of his attorney fees;” subd. 7 fees considered “partial reimbursement” to employee for attorney fees). Therefore, subdivision 7 fees are not additional attorney fees. Rather, the employee keeps the subdivision 7 fees as partial reimbursement for attorney fees already paid.

Accordingly, for offset purposes, the excludable attorney fee expenses should be reduced by the amount of the subdivision 7 fees.

You asked whether the subdivision 7 fees could be treated as “penalties paid by the employer or WC payer to the individual for failing to provide timely WC payments” which, per POMS DI 52105.015, would not be considered WC for offset purposes. In this case, it appears that the employer denied liability and unsuccessfully resisted the payment of compensation and medical expenses. The claimant hired an attorney, who successfully procured payment. Thus, the claimant met the requirements for an additional award under Minn. Stat. § 176.081, subd. 7. While it is possible that the award described in this statutory provision could be broadly construed as a penalty to the employer for failing to provide timely WC payments, we believe the better reading of this statutory provision is that such an award constitutes partial reimbursement to the employee for attorney fees, rather than a penalty for failing to provide timely WC payments. Therefore, the effect is to decrease the amount of the excludable legal expenses, as discussed above.

CONCLUSION

For the foregoing reasons, we conclude that subdivision 7 fee reimbursements under Minn. Stat. § 176.081, subd. 7, should be deducted from the excludable legal expenses, because they serve as reimbursement to the employee for attorney fees.

Donna L. C~

Regional Chief Counsel, Region V

By: _____________

Cristine B~
Assistant Regional Counsel

B. PR 08-169 SSI-Review of Minnesota Law Concerning Public Disability Benefits - REPLY Our Reference: 08-0193-NC

DATE: August 13, 2008

1. SYLLABUS

The issue is whether Minnesota public disability benefits, subject to offset under Section 224 of the Social Security Act, are no longer subject to offset when converted to retirement pension (i.e., service pension). A related issue is whether, under Minnesota Statute 423A.11, an individual is required to remain disabled in order to continue receiving the converted service pension. Based on the relevant provisions of Minnesota law and given that there is no provision that the person must remain disabled in order to receive a service pension, SSA's current practice of discontinuing offset after a PDB converts to a service pension is appropriate.

2. OPINION

INTRODUCTION

You have asked whether 1) SSA's current practice of discontinuing offset after a Public Disability Benefit (PDB) converts to a retirement or "service pension" is appropriate in light of Minnesota law 423A.11; and 2) based on that information, whether POMS DI 52001.326A.2 currently stands as correct, or if it requires correction before the rewrite is effectuated. Based on our review, we believe that SSA's current practice of discontinuing offset after a PDB converts to a service pension is appropriate given that there is no provision that the person must remain disabled in order to receive a service pension, and the recipient is treated generally the same as other service pension recipients under Minnesota law. Based on this analysis, we conclude that POMS DI 52001.326A.2 currently stands as correct.

DISCUSSION

The Social Security Act places a ceiling on an individual's combined Social Security benefits and state public disability benefits (PDB). See 42 U.S.C. 424a. Where an individual is receiving both DIB and a PDB, his or her DIB shall be reduced by the amount necessary to ensure that the sum of the state and federal benefits does not exceed 80 per cent of the individual's average pre-disability earnings. 42 U.S.C. 424a(a); POMS DI 52001.035(B). The offset reflects Congress' concern that recovery of overlapping disability benefits decreases an injured worker's incentive to seek rehabilitation, reduces the duplication inherent in the programs and, at the same time, allows a supplement where the state benefits are inadequate. See generally Richardson v. Belcher, 404 U.S. 78, 82-83 (1971) (discussing offset provisions as they relate to worker's compensation benefits). However, POMS DI 52001.326 instructs SSA not to continue to offset disability benefits after a PDB converts to a retirement or "Service Pension" as the benefit, if it is a true retirement benefit, is no longer seen as duplicative. See POMS DI 52001.326(A)(2).

Currently, POMS DI 52001.326 concerning Minnesota Public Disability benefits provides that a service pension that was converted from a PDB under Minnesota law is a retirement benefit and is not based on disability. Thus, is not offsettable. Id. You have asked whether this provision is accurate, and specifically you have asked whether, under Minnesota Statute 423A.11, an individual is required to remain disabled in order to continue receiving the converted service pension.

Under Minnesota law, a person employed as a police officer or firefighter who becomes disabled from an injury or illness arising out of or in the course of the line of duty shall be entitled to a disability benefit if they are not entitled to a service pension. MINN. STAT. § 353B.08. However, the statute clearly states that the disability benefit terminates when the disabled person attains the minimum age or number of years of service to begin receiving a service pension in the amount equal to the amount of the disability benefit. MINN. STAT. § 423A.11(1). When this occurs, the disabled member shall be deemed a service pensioner and shall be entitled to receive a service pension without any benefit offset required pursuant to any applicable provision of law. MINN. STAT. §§ 423A.11(2), 353B.08(13). Once the disabled member becomes a service pensioner, that person cannot be eligible for disability benefits after that date even if that person becomes permanently disabled. MINN. STAT. § 423A.11(3). Therefore, it does not appear that a person must remain disabled in order to receive a service pension once the disability benefit ceases.

We further note that a converted service pension is generally provided on the same terms as apply under regular retirement. However, we note that, if a converted service pensioner becomes "permanently disabled," that individual will be allowed to receive a service pension equal to the amount of disability benefit which would have been paid if the person had been entitled to the disability benefit or the amount of the service pension, whichever is greater. MINN. STAT. § 423A.11(3). However, it does not appear that this is a meaningful discrepancy, such that it would undermine the purpose of 42 U.S.C. 424a.

Indeed, Bob M~, in the Office of Program Law, has already considered minor discrepancies, such as whether a service pension should be considered a PDB when the converted service pensioner must rely upon the years of disability as well as the years of active employment to qualify for a service pension, as opposed to relying only on years of active employment for the regular retirement system. See Pending Issue #29 - Pensions Converted From Disability to Retirement, Discussion by Bob M~, Office of Program Law/OGC (6/11/08) (included in attached materials). He concluded that this type of discrepancy did not require the subsequent retirement benefit to be considered a PDB. Id. Rather, in his opinion, the most important factor is whether the individual must continue to be disabled in order to continue receiving the service pension. Id. And here, we conclude that there is no requirement of continuing disability.

Finally, you were concerned that Minnesota Statute 423A.11 may have been enacted in an effort by the state to circumvent SSA's offset policy. However, a review of the procedural history in this case shows that this statute was enacted in 1982. According to Policy Net, the earliest version of POMS DI 52001.326 was enacted in July 1990. Therefore, we do not find any obvious attempt by the state to circumvent SSA's offset policy by allowing PDB recipients to convert their benefits to service pensions.

CONCLUSION

Therefore, we believe that SSA's current practice of discontinuing offset after a PDB converts to a service pension is appropriate given that there is no provision that the person must remain disabled in order to receive a service pension, and the recipient is treated generally the same as other service pension recipients under Minnesota law. Further, we conclude that POMS DI 52001.326(b) is accurate and does not need to be modified or rewritten.

Donna L. C~

Regional Chief Counsel, Region V

By: _____________

Anne M~
Assistant Regional Counsel

C. PR 00-406 Can Minnesota Permanent Partial Workers Compensation Awards in the Form of Economic Recovery Compensation Be Reclassified as Permanent Total Disability to Avoid Offset? -- Herman T~, SSN ~ -

DATE: March 16, 2000

1. SYLLABUS

(Based on section 224 of the Act, M.S.A. §§0 176.101, 176.021, and SSA policy we believe that Mr. T~'s employer could not reclassify his prior economic recovery compensation award as payments for permanent total disability compensation and that, as Minnesota's reverse offset does not apply to Mr. T~'s prior economic recovery compensation payments, the agency correctly offset Mr. T~'s benefits. section 224a.)

2. OPINION

Herman T~ received periodic workers compensation payments for a permanent partial disability in Minnesota, and later he settled his claim based on an agreement that he had a permanent total disability. You asked whether the agreement that Mr. T~ was permanently and totally disabled served to recharacterize his permanent partial payments as total payments. For the reasons we state below, we believe that SSA is not required to recharacterize the permanent partial payments.

BACKGROUND

Mr. T~, who was born on June 30, 1943, sustained an on-the-job injury in March 1988 when he was 44 years old. He received $38, 906.77 worker's compensation benefits for temporary total disability from March 1988 through December 1, 1990. In addition, beginning in February 1991, Mr. T~ also received economic recovery compensation, a special type of permanent partial workers compensation, at the rate of $360.29, representing a 12% permanent partial disability.

In March 1991, Mr. T~ applied for DIB. In May 1992, an ALJ found that Mr. T~ was entitled to disability benefits with an onset date of June 15, 1990. In July 1992, the agency notified Mr. T~ that his social security benefits would be reduced due to his workers' compensation benefits.

In September 1992, Mr. T~ entered a settlement agreement with his employer and his employer's insurance company (the original stipulation) in which the parties agreed that Mr. T~ had been paid $38,906.77 in temporary total disability benefits by December 1, 1990; that in addition, he had been paid economic recovery compensation benefits for 72 weeks at the rate of $360.29 per week, totaling $25,940.88 for the period from February 1991 through June 22, 1992. Original Stipulation at 2. Notwithstanding their different claims, the parties agreed that Mr. T~ had been permanently totally disabled since March 1988, that all weekly benefits paid to him for "temporary total disability through December 1, 1990 to the present and continuing" should be deemed to be permanent and total disability benefits; that the employer/insurer had paid the threshold amount of $25,000 in weekly benefits by December 1, 1990; and that the employer was entitled to reverse offset (pursuant to M.S.A. § 176.101, Subd. 4).

In November 1994, the agency notified Mr. T~ that, based on the September 1992 stipulation, the employer had paid a total of $25,000 in permanent total benefits as of December 1, 1990, and (as those benefits were now subject to Minnesota's "reverse offset"), his social security benefits were no longer affected by his permanent total workers compensation benefits. His permanent partial payments for economic recovery compensation, which began in February 1991 and ended in June 1992, however, were subject to a separate social security offset, and the agency accordingly reduced his social security benefits during that period ending in June 1992, resulting in an overpayment of $4,623.

In December 1994, Mr. T~'s attorney requested reconsideration of this determination that he had been overpaid, claiming that while Mr. T~'s permanent partial disability benefits were initially paid as economic recovery compensation prior to the determination that he was permanently and totally disabled, thereafter, his economic recovery compensation benefits were credited against his permanent total disability benefits and he was paid instead permanent partial benefits in the form of impairment compensation.

In February 1996, Mr. T~'s attorney renewed his argument that Mr. T~'s previously received payment of 12% permanent partial disability was automatically recalculated and paid as impairment compensation under Minnesota statute when an employee is found to be permanently and totally disabled, citing Minn. Stat. § 176.101(3)(o), and that consequently no permanent partial benefits were made to Mr. T~ after December 1, 1990 when the agency removed its workers' compensation offset with respect to his permanent total disability benefits.

In July 1996, the agency notified Mr. T~ that it had reconsidered its determination but because they had not received any new information, it was not taking action on his request. The agency indicated that it had been informed that counsel was going to obtain a clarification of the stipulation and that once the approved clarification was received, they would take any necessary action. Mr. T~ was also advised of his right to request a hearing within 60 days from the date he received this notice.

In September 30, 1996, Mr. T~ obtained a "Supplemental Stipulation," the purpose of which was "to clarify the employer's and insurer's obligation to pay impairment compensation for a 12% whole body permanent partial disability pursuant to Minn. Stat. § 176.101, Subd. 3(o)." Article V, Supplemental Stipulation. Specifically, the supplemental stipulation provides that the prior economic recovery compensation payments were to be "retroactively reclassified as permanent total disability benefits," thus subject to Minnesota's reverse offset, and indicating that this was a "statutorily authorized reclassification of benefits." Article VIII, Supplemental Stipulation.

In December 1996, Mr. T~'s attorney contended that Paragraph VIII, Paragraphs 2 and 3 of the supplemental stipulation clarified that Mr. T~ received no permanent partial disability of any type after December 1, 1990 (even though he had previously asserted that his economic recovery compensation had been recalculated as impairment compensation and that the purpose of the amended stipulation was to clarify the employer's obligation to pay impairment compensation), and that therefore the agency should not have reduced his social security benefits after that date.

DISCUSSION

The Social Security Act places a ceiling on an individual's combined social security benefits and state workers' compensation benefits. See 42 U.S.C. § 424a. Where an individual is receiving both social security disability insurance benefits and state workers' compensation benefits, his or her social security benefits shall be reduced by the amount necessary to ensure that the sum of the state and federal benefits does not exceed 80 per cent of the individual's average pre-disability earnings. 42 U.S.C. 424a(a). The offset reflects Congress' concern that recovery of overlapping workers' compensation and social security disability benefits decreases an injured worker's incentive to seek rehabilitation, reduces the duplication inherent in the programs, and at the same time allows a supplement to workmen's compensation where the state payments are inadequate. Richardson v. Belcher, 404 U.S. 78, 82-83 (1971). Worker's compensation benefits subject to this offset are "periodic benefits [paid] on account of his or her total or partial disability (whether or not permanent) under a worker's compensation law." 42 U.S.C. § 424a(a)(2)(A).

In Minnesota, after permanent total disability benefits of $25,000 have been paid, workers' compensation will reduce the permanent total disability benefits it pays in order to reflect the disability insurance benefits that an individual is receiving from the Social Security Administration. Minn. Stat. Ann. § 176.101, Subd. 4 ("reverse offset"). In order to prevent an individual from being subjected to offset by both the state and federal agencies, the Social Security Act provides that SSA stops its own offset if the state is executing a "reverse offset." See 42 U.S.C. § 424a(d). In Minnesota, the reverse offset applies only when the workers' compensation benefits exceed $25,000 and only in cases of permanent total disability. Minn. Stat.Ann. § 176.101, Subd. 4; see also McClish v. Pan-O-Gold Baking Company, 336 N.W.2d 538, 543 (Minn. 1983) (holding that the reverse offset does not apply to temporary total disability benefits, or to any other benefits except permanent total disability benefits).

Permanent partial awards, then, are not subject to "reverse offset" under Minnesota law, and SSA offsets such compensation payments for permanent partial disabilities no matter the amount. See POMS DI 52120.130; see also Herrley v. Chater, 108 F.3d 1381 (8th Cir. 1997) (Table), 1997 WL 90316 (8th Cir. (Minn.)) (upholding agency's determination that a lump sum payment for permanent partial disability was not subject to "reverse offset" under Minnesota law (because the compensation was for a permanent partial, not total, disability ) and finding that it was a periodic payment subject to social security offset, even though Minnesota distinguishes disability benefits which are paid to compensate for a functional loss of body from lost income benefits); accord Olson v. Apfel, 170 F.3d 820, 825 (8th Cir. 1999) (holding that payment for permanent partial disability was periodic payment subject to federal offset, even though North Dakota distinguishes disability benefits, which are paid on account of reduced earning capacity or wage loss, from impairment awards, which are paid on account of loss of bodily function).

Here, the original stipulation reclassified the $38,906.77 compensation paid as temporary total disability through December 1, 1990, as compensation for permanent total disability. The employer accordingly reduced the weekly permanent total disability compensation due by the amount of the social security benefits. Beginning December 1990, the employer paid Mr. T~ $168.33 per week for his permanent total disability. Original Stipulation, Articles VII, VIII. The agency accordingly removed its offset of Mr. T~'s permanent total disability benefits.

The agency, however, continued to offset the permanent partial economic recovery compensation award of $25,940.88 that Mr. T~ had received from 2/91 until 9/92 as permanent partial compensation for the 12% loss of body function. Thereafter, Mr. T~'s counsel submitted an amended stipulation by which he attempts to recharacterize the permanent partial economic recovery compensation award as an award for permanent total disability, claiming that the reclassification was "statutorily authorized" under subd. 3o of M.S.A. § 176.101.

We do not believe that the statute directly answers this question one way or the other. Nonetheless, we think the better answer is that the economic recovery compensation for a permanent partial impairment is not reclassified as compensation for permanent total disability. Subd. 3o provides in pertinent part as follows:

Subd. 3o: Inability to return to work. (a) An employee who is permanently totally disabled pursuant to subdivision 5 shall receive impairment compensation as determined pursuant to subdivision 3b. This compensation is payable in addition to permanent total compensation pursuant to subdivision 4 and is payable concurrently. In this case the impairment compensation shall be paid in the same intervals and amount as the permanent total compensation was initially paid, and the impairment compensation shall cease when the amount due under subdivision 3b is reached. . . .

(b) If an employee is receiving periodic economic recovery compensation and is determined to be permanently totally disabled no offset shall be taken against future permanent total compensation for the compensation paid and no permanent total weekly compensation is payable for any period during which economic recovery compensation has already been paid. No further economic recovery compensation is payable even if the amount due the employee pursuant to subdivision 3a has not yet been reached.

(c) An employee who has received periodic economic recovery compensation and who meets the criteria under clause (b) shall receive impairment compensation pursuant to clause (a) even if the employee has previously received economic recovery compensation for that disability.

M.S.A. § 176.101, subd. 3o.

Clause (b) provides that if an employee is receiving economic recovery compensation and is determined to be permanently totally disabled, the employer cannot take any offset against the future permanent total compensation due the employee for the economic recovery compensation he already paid the employee, the employer cannot pay any permanent total weekly compensation for any period during which the economic recovery compensation was already paid, and the employer cannot pay any more economic recovery compensation even if the amount due the employee, under subd. 3a, has not yet been reached. (Here, however, the employer paid Mr. T~ $25,940, the full amount of economic recovery compensation due him under subd. 3a). Clause (b) seems to provide that an employee cannot receive concurrent payments for both economic recovery compensation and permanent total disability. But, the statute provides that if an employee has received economic recovery compensation and is later determined to be permanently totally disabled, under clause (c), the employer must pay the employee the amount of impairment compensation due him under subd. 3a, even if he has received economic recovery compensation for that disability. Thus, under subd. 3o, Mr. T~'s employer would seem to owe him an additional $9,000 in impairment compensation without a credit for the economic recovery compensation already paid, but does not owe him any compensation for his reduced earning capacity due to his permanent total disability during the period Mr. T~ received economic recovery compensation. M.S.A. §§ 176.021, subd.3, 176.101, subd.3o.

Here, the parties asserted that the amended stipulation is intended to clarify the employer's obligation to pay impairment compensation of $9,000 for a 12% whole body permanent partial disability, Amended Stipulation, Article V, once it was determined that Mr. T~ had been disabled since March 15, 1988. Amended Stipulation at VIII, par. 1-par.2, citing Minn. Stat. § 176.101, Subd. 3(o). It does not appear, however, that the employer paid the additional impairment compensation award of $9,000. Rather, the amended stipulation stated that the previously paid $25,940.88 permanent partial economic recovery compensation was "retroactively recharacterized" as permanent total disability benefits reduced by the reverse offset, effective December 1, 1990 when Mr. T~ began receiving social security DIB, id., and that it was also used as credit for the $9,000 impairment compensation award: any overpayment occasioned by the difference between economic recovery compensation benefits previously paid and reduced permanent total benefits due since December 1, 1990 was balanced against the employee's claim for the 12% impairment compensation. Id.

The Minnesota's Worker's Compensation statute does not appear to directly answer the question as to whether the economic recovery compensation can be recharacterized as permanent total, and we have not found any cases that directly answer this question. We have communicated with the Minn. Department of Labor and while they do not have an authoritative answer, they told us that it could be consistent with the purposes of the statute to interpret the amended settlement as recharacterizing the economic recovery compensation as permanent total disability. They point out that if clause (b) and (c) are taken literally, the employer would have to pay a double payment of permanent partial disability for the employee's loss of function, one payment for economic recovery compensation and another for impairment compensation, but that the employer would not have to pay any compensation for the employee's wage loss benefits during the period the employee received economic recovery compensation, even though the employee has now been determined to be permanently and totally disabled during the period he received economic recovery compensation. According to this possible interpretation, subd. 3o declares the permanent total disability that should have been paid during the period and the economic recovery compensation that was paid as a "wash," or even perhaps that the economic recovery compensation was "reclassified" as permanent total disability payments for wage loss, not permanent partial payments for loss of function. They reason that then it would be reasonable for the employer to pay impairment compensation but not to owe any permanent total disability payments for the period the employee received the economic recovery compensation. This interpretation appears to assume that if an employee has received economic recovery compensation and is later determined to be totally disabled, he should have received permanent total disability payments instead of economic recovery compensation. Under this interpretation, the employee receives one payment of permanent partial disability, the impairment compensation, but does not receive the economic recovery compensation because it has been reclassified as permanent total disability.

We believe, however, that in the absence of controlling authority saying that economic recovery compensation is reclassified as permanent total, the more prudent response is not to assume that the economic recovery compensation was reclassified as permanent total disability compensation. Rather, we believe that it is more reasonable to interpret the statute as meaning exactly what it says, that the employer pays compensation for a permanent partial impairment of loss of whole body function in the form of economic recovery compensation until the employee is determined to be permanently totally disabled. Once it is determined that the employee is permanently disabled, he can no longer receive economic recovery compensation and he cannot receive any permanent total disability payments for the period he was receiving economic recovery compensation. Instead, the employer must compensate the employee for his permanent partial loss of body function in the form of impairment compensation, even if, as here, the employee has received his full economic recovery compensation award, and he must also pay permanent total disability compensation for loss of wages, in addition to and concurrently with his permanent partial impairment compensation payments. M.S.A. § 172.101, Subd. 3o(b). Once it is determined that an employee's injury has resulted in permanent total disability, the statute discusses how to compute the permanent total benefits for lost wages as well as the permanent partial compensation for the loss of body function for the retroactive period and does not require reclassification of the economic recovery compensation as permanent total disability.

Our interpretation that the statute does not require reclassification of permanent partial economic recovery compensation as permanent total disability compensation is consistent with other provisions of the statute providing that compensation for permanent partial disability is payable for functional loss of use or impairment of function, that permanent partial payments for loss of function are separate, distinct and in addition to permanent total payments for compensation for wage loss, and that the employer cannot take credit for any economic recovery compensation payments against future payments of permanent total disability. M.S.A. § 176.021, subd.3, provides in part: Subd.3. Compensation, commencement of payment. All employers shall commence payment of compensation at the time and in the manner prescribed by this chapter without the necessity of any agreement or any order of the division. . . If doubt exists as to the eventual permanent partial disability, payment for economic recovery compensation or impairment compensation, whichever is due, pursuant to section 176.101, shall be then made when due for the minimum permanent partial disability ascertainable, and further payment shall be made upon any later ascertainment of greater permanent partial disability. Prior to or at the time of commencement of the payment of economic recovery compensation or lump sum or periodic payment of impairment compensation, the employee and employer shall be furnished with a copy of the medical report upon which the payment is based and all other medical reports which the insurer has that indicate a permanent partial disability rating, together with a statement by the insurer s to whether the tendered payment is for minimum permanent partial disability or final and eventual disability. . . . Economic recovery compensation or impairment compensation pursuant to section 176.101 is payable in addition to but not concurrently with compensation for temporary total disability but is payable pursuant to section 176.101. Impairment compensation is payable concurrently and in addition to compensation for permanent total disability pursuant to section 176.101. Economic recovery compensation or impairment compensation pursuant to section 176.101 shall be withheld pending completion of payment for temporary total disability, and no credit shall be taken for payment of economic recovery compensation or impairment compensation against liability for temporary total or future permanent total disability. Liability on the part of an employer or the insurer for disability of a temporary total, temporary partial, and permanent total nature shall be considered as a continuing product and part of the employee's inability to earn or reduction in earning capacity due to injury or occupation disease and compensation is payable accordingly, subject to section 176.101. Economic recovery compensation or impairment compensation is payable for functional loss of use or impairment of function, permanent in nature, and payment therefore shall be separate, distinct, and in addition to payment for any other compensation, subject to section 176.101. . . .

M.S.A. § 176.021, Subd.3 (emphasis added).

This section distinguishes compensation for permanent partial disability in the form of either economic recovery compensation or impairment compensation from other compensation in the form of temporary and permanent total disability. The former compensates an employee when his injury results in loss of function and the latter compensates the employee when that same, or other, injury results in loss of ability to earn wages. In construing provisions of the Workers' Compensation Act, each is viewed as supplementary to the others. Nordman v. Goldfines, 270 N.W. 2d 766, 767-68 (Minn. 1978). If these principles are applied, the most reasonable interpretation of section 176.101, subd. 3o, which will give effect to section 176.021, is that the legislature intended that compensation for permanent partial disability, whether in the form of economic recovery compensation or impairment compensation, is payable for permanent functional loss of use or impairment of function and that payments for it are separate, distinct, and in addition to compensation for permanent total disability which is payable for loss of earning capacity. Under the statute, then, although the same injury could result in both permanent partial and permanent total disabilities, they are completely separate and distinct types of losses, and payments for them are not interchangeable but must remain separate, distinct, and in addition to each other. It therefore appears that, in keeping with these provisions, it is more reasonable to assume that the legislature did not intend that economic recovery compensation payments for functional loss could be reclassified as permanent total payments for loss of earning capacity.

Here, SSA did not dispute Mr. T~'s reclassification of his temporary total disability benefits to permanent total disability benefits per the original agreement (Article VIII), which subjected those benefits to Minnesota's reverse offset, thereby removing social security's offset as of December 1990 when $25,000 of permanent total had been paid. Although it may be a close question, in the absence of controlling authority saying that payments for economic recovery compensation can be reclassified as payments for permanent total disability, we believe that it cannot be reclassified. Therefore, the $25,940 in permanent partial economic recovery compensation payments made by Mr. T~'s employer between February 1991 and June 1992 for a 12% whole body loss cannot be reclassified as permanent total disability payments for loss of earning capacity, and are not subject to reverse offset. Consequently, the agency can offset the permanent partial economic recovery compensation payments. See also Herrley v. Chater, 108 F.3d 1381 (8th Cir. 1997) (Table), 1997 WL 90316 (8th Cir. (Minn.)) (upholding agency's determination that while a lump sum payment for permanent total disability was subject to a "reverse offset", a lump sum payment for permanent partial disability was not subject to a "reverse offset" under Minnesota law and therefore was subject to social security offset under 42 U.S.C. 424a).

CONCLUSION

Based on section 224 of the Act, M.S.A. §§0 176.101, 176.021, and SSA policy we believe that Mr. T~'s employer could not reclassify his prior economic recovery compensation award as payments for permanent total disability compensation and that, as Minnesota's reverse offset does not apply to Mr. T~'s prior economic recovery compensation payments, the agency correctly offset Mr. T~'s benefits. section 224a Therefore, we believe the agency can properly find that Mr. T~ had been overpaid for the period between February 1991 through June 22, 1992 when he received both economic recovery compensation benefits and social security benefits.