TN 8 (08-14)

Citations:

SSR 94-6 , Workers’ Compensation Offset—Excluding Legal Expenses Incurred in Connection with Initial Award of Workers’ Compensation Benefits—Washington

Washington State reduces its WC benefits if the disabled worker also receives Social Security disability insurance benefits (DIB). Since WC benefits are reduced (offset), rather than DIB, this is referred to as reverse offset or reverse jurisdiction (RJ).

A. WA WC types

There are four types of WC benefits payable under Washington State law.

Washington State reduces (offsets) its Time Loss and Pension benefits if the disabled worker is also receiving Social Security retirement insurance benefit (RIB) or DIB. The State offset also applies to Time Loss or Pension benefits paid to the spouse and children living in the same household as the disabled worker.

State law does not provide for offset of PP for the receipt of Social Security RIB or DIB. A permanent partial lump sum (LS) will cause offset of Social Security DIB.

B. WA WC important dates

The list below contains dates that are important to keep in mind when considering WA WC.

C. Processing WA WC offset cases

1. When to impose offset

• Impose offset for the retroactive period of the DIB award, and

• Impose offset beginning the month the number holder (NH) attains age 62 (use the full WC rate, not the State’s offset rate).

2. When reverse offset applies

Do not impose WC offset when RJ applies. Apply RJ effective the month after the calendar month of adjudication. For example, we award Social Security DIB to a disabled worker (30 years old) who is receiving Washington PT benefits. The worker’s month of entitlement to DIB is 09/2011. The DIB claim is adjudicated 01/13/2012. DIB is offset 09/01/2011-01/31/2012 and RJ is effective 02/01/2012.

EXCEPTION: If the NH is already age 62, continue to offset at the full WC rate.

3. Verifying and excluding legal expenses

• State documents (including completed Form SSA-1709 (Request for Workers’ Compensation/Public Disability Benefit Information) do not contain legal expense information.

• Verify possible legal expenses through the NH, attorney, or non-attorney. See DI 52120.265E in this section.

4. When to use the Washington State WC data sheet

If adjudicating a claim with WA WC or re-imposing offset at age 62:

• Complete, date and mail or fax the Washington State WC Data Sheet. . The carrier or self-insurer must receive notice timely.

• Retain a copy of the completed data form in the electronic folder, non-disability repository for evidentiary documents (NDRed) or Paperless.

D. How Washington makes WC payments

This section describes how WA makes WC payments under State law and provides instructions on how to treat these payments for SSA offset purposes.

1. Payers

• State of Washington Department of Labor & Industries (L&I)

• Self-insured Employer (indicated by WC claim number with prefix “S” or “T” or “W”), or

• Third Party Administrator (i.e., a service organization hired by the self-insured employer)

2. Periodic payments

*Prior to 06/01/1993, L&I made TT payments twice a month; insurance carriers and self-insured employers made TT payments biweekly. To determine a monthly amount follow DI 52150.035. (For periods prior to 06/01/1993, use the monthly TT rate as shown on Form SSA-1709 or on L&I document as the monthly amount.)

3. LS payment

NOTE: Do not offset PP WC for any period prior to 01/16/1981. SSA’s decision to begin imposing offset of PP WC is based on a change in Washington State law. Claims adjudicated prior to the change in SSA’s policy were identified in normal case processing and had offset imposed with the current operating month or, if later, the month after the month of notice in Notice Provision cases per DI 52170.040.

A claimant/claimant's attorney may negotiate a voluntary LS settlement agreement (sometimes referred to as a "sidebar agreement") directly with the employer/insurance carrier to settle the WC claim. The agreement usually includes language where the claimant agrees to an immediate claim closure, agrees not to protest or appeal the closing order, and acknowledges that the settlement resolves all issues relating to the WC claim. These agreements are subject to offset whether or not they require approval of the Washington State WC board, and whether or not Washington State law considers the payment to be payment of weekly WC. Follow proration instructions in DI 52150.060 Prorating a Workers' Compensation/Public Disability Benefit (WC/PDB) Lump Sum Settlement.

4. Structured settlement agreement

As of January 1, 2012, State law (RCW 51.04.063) changed to include a new WC option for injured workers. The new option is Claim Structured Settlement Agreement. In order to be eligible for the new option, the injured worker must be at least 55 years old as of January 1, 2012 AND have an accepted L&I claim that is at least six months old. When the injured worker receives the structured settlement, they receive a LS award and relinquish any further rights to L&I benefits or payments.

5. Sequence of payments by type

The sequence in which WA makes TT, PT and PP payments can vary. Generally, the payments follow one of the patterns shown below. If a worker received both PT and TT payments, the TT payments always precede the PT payments.

• Time Loss (TT) followed by PP

• Time Loss (TT) followed by PP followed by gap(s) followed by Time Loss (TT) followed by pension (PT)

• Time Loss (TT) followed by pension (PT) (possible gaps and PP)

• PP alone with no TT

6. Cost-of-living adjustments (COLAs)

WA pays a cost-of-living increase each July 1 for TT and PT benefits. The annual increase became effective 07/1984 under State law. The table below shows the COLA percentage increases from 1990 to the present:

*For dates of injury on or after July 1, 2011, the TT or PT COLA is not effective until the second July 1st after the date of injury. For example:

Scenario #1 - WC date of injury 06/30/2011 – first TT or PT COLA is 07/01/2012.

Scenario #2 - WC date of injury 07/01/2011 (one day later than Scenario #1) – first TT or PT COLA is 07/01/2013.

The following rules govern how the increases are determined and paid:

• All TT & PT recipients are eligible for a full COLA increase, regardless of when benefits began.

• The COLA percentage is added to the current benefit amount and the result is rounded to the nearest penny.

• TT COLA increases are payable immediately; PT COLA increases first appear in the August 15 check, which will include the difference due from July 1.

7. Third party

Generally, when a third party settlement is awarded in WA WC, the third party reimburses L&I for any WC payments already made. L&I will adjust the WC payments by withholding future payments until the settlement amount is fully recovered. Offset does not apply in this situation to the extent L&I was repaid by the third party per DI 52105.010. See case Example 4, in DI 52120.265K. in this section.

E. Excludable expenses (see DI 52150.050)

1. Attorney fees

Payment of attorney fees is always the responsibility of the disabled worker in WA WC cases. The State will not normally account for or set attorney fees, except when approving Structured Settlement Agreements (see DI 52120.265D.4. in this section). The State may pay benefits directly to the attorney who will deduct legal fees and disburse the balance to the worker. Therefore, always verify the amount of attorney fees through the NH or attorney. Prior to the ruling, we excluded legal expenses only when WC benefits were awarded on appeal. This change in position was effective 01/31/1989.

Under WA WC law, an attorney may charge a reasonable fee of not more than 30 percent of the increase in the WC award secured by the attorney's services. Social Security Ruling SSR 94-6 included in the definition of “increase” those initial awards that increase the amount of the WC from zero to the amount awarded.

2. Medical expenses

WA WC cases rarely involve medical expenses because State law provides for direct payment of medical expenses by the WC payer.

F. Reverse offset

Since 09/1975, Washington WC law has provided for a reduction of TT and PT WC payments due to the receipt of Social Security DIB. This is a recognized reverse offset plan. For more information on reverse offset, see DI 52105.001.

• State law provides that offset may not be imposed until the State (L&I):

  1. Receives notice from SSA that the disabled worker is receiving Social Security benefits; and

  2. Notifies the worker of the offset of the L&I benefit.

• L&I applies offset beginning the month after notification and does not retroactively apply offset. We remove offset the month following the month of adjudication.

• L&I uses the same basic formula as we do in applying offset, limiting the total amount of WC and Social Security benefits to the higher of total family benefit (TFB) or total WC or 80 percent average current earning (ACE). For example, for a record with HA only, entitled 05/1999 with a primary insurance amount (PIA) of $1289.20, total monthly WC of $2,000.00, and 80 percent ACE of $2611.20, L&I will calculate an “offset” WC payment of $1322.20 ($2611.20 minus $1289.00 monthly benefit payable (MBP)).

NOTE: The instructions in this section apply to cases adjudicated 09/01/1981 or later. For cases adjudicated before 09/01/1981, do not offset for any month after 08/1975 when the NH received TT or PT WC.

1. Applying reverse offset when adjudicating a claim

1. Offset TT and PT WC from the first possible month of offset up to and including the full calendar month of adjudication.

2. Reverse offset applies beginning with the month after the calendar month of adjudication and continues through the month prior to the month of attainment of age 62.

   • Payments under the Critical Payment System (CPS) do not constitute adjudication.

   • A delay in processing due to exceptions, etc. will not change the month of adjudication.

3. To adjudicate a claim via MCS, see the processing instructions in DI 52120.265G. in this section.

4. When adjudicating a claim with WA WC, send the Washington State WC Data Sheet to L&I or the self-insured employer. It is important to send the data sheet at the point of adjudication as L&I rely on timely and accurate notification from SSA to impose State offset. Also, notify L&I that offset resumed and provide the amount of the monthly benefit amount (MBA) payable after offset.

5. Tell the NH to notify the nearest Social Security office if he or she receives a PP settlement or if PP payments begin.

6. Diary for 4 months prior to age 62. If you process the claim via MCS, enter a 042 diary and update the due date to 4 months prior to age 62. Complete the DIAR screen to explain the reason for the diary.

See case Examples 2 and 4, DI 52120.265K in this section.

2. Applying reverse offset when an appeal reverses DIB cessation

Offset TT and PT WC from the effective month of DIB reinstatement up to and including the month in which adjudicative action is taken to resume DIB.

3. Applying reverse offset when WC payments start after DIB awarded

• SSA’s WC offset applies from the first possible month of offset through the month of the award action that initiates DIB payments (and at age 62). Once SSA starts DIB payments, reverse jurisdiction applies. Therefore, if a beneficiary, who was not receiving WC payments at the time of adjudication of the DIB award, begins receiving either TT or PT payments, offset will not apply until age 62.

• Code the case RJ and do not adjust benefits already paid. There is no need for a State data sheet in this situation.

4. Re-imposing offset at age 62

In 03/1982, the State extended its offset provision from age 62 to 65 for workers who are awarded TT or PT WC effective 01/01/1983 or later. Since this change in State reverse offset law was not in effect by 02/18/1981, we do not recognize the change for DIB offset purposes for cases where the DIB onset is 03/01/1981 or later and the DIB month of entitlement (MOE) is 09/1981 or later.

RJ ends the month prior to the month the NH attains age 62.

• RETAP will produce an alert in addition to any manual or MCS diary.

• Resume offset beginning the month the NH attains age 62 at the full WC rate that would have been payable had there been no State offset. Offset continues up to, but not including, the month the NH attains age 65 before December 19, 2015. Effective December 19, 2015 or later, WC offset termination extends from age 65 to full retirement age (FRA). See 2015 Amendment in DI 52101.005.

• For instructions on protected benefit increases during the RJ period and when to establish a new ACE and TFB in age 62 reimposition cases, see DI 52105.001G.2.

• Notify L&I that offset resumed and provide the amount of the MBA payable after offset. Fax or mail the Washington State WC Data Sheet. to L&I. Include in Remarks “Offset resumed at age 62. MBA = $$$$$.cc.” See case Example 2, DI 52120.265K in this section.

5. RIB benefit considerations

WA applies offset against both DIB and RIB. When SSA re-imposes offset from age 62-65, the State treats this as a reduction in the amount of disability benefits and adjusts the WC benefits accordingly. Once SSA offset ends at age 62 (for pre-1981 cases); at age 65 before December 19, 2015 (in the 1981 amendments); and at FRA effective December 19, 2015 or later; L&I will adjust the State offset for the increase in the SSA payment.

• Do not routinely secure RIB claims from NHs age 62-65, as their DIB entitlement will usually continue to be more advantageous than the RIB claim.

• NHs can contact L&I if they want to know the effect on their specific L&I benefit amount.

• If a NH files for RIB in this situation, normal protective filing rules apply, i.e., there is no protective filing by the mere fact of attaining age 62.

• Do not delay re-imposing offset at 62 when developing a RIB claim.

NOTE: In a small number of cases where the NH has been simultaneously entitled to DIB and WC for an extended period of time, the offset computation figures used by L&I and SSA may differ. In these cases, the NH may benefit from electing RIB. Prior to electing RIB, the NH should contact L&I to determine any changes that may occur in the WC benefit.

6. Re-imposing offset retroactively

As explained in DI 52120.265F.4. in this section, we re-impose offset at age 62 using the full WC rate without reduction for State offset. Sometimes we discover after the fact that we failed to re-impose offset at age 62. Include AURORA paragraph PCWCP5003 in the notice when adjusting payments retroactively to age 62.

Prior to 04/26/2005, if the WC claim was closed (PT Pension awarded, or closure with or without PP), L&I was barred from adjusting WC payments and therefore could only report to SSA the WC benefits “as paid,” not the full unreduced rate that would have been payable without State offset. In this situation, we used the COLA chart in DI 52120.265D.6 in this section, to convert the last known full rate.

On 04/26/2005, WA amended State law to allow L&I or a self-insurer to retroactively adjust closed WC claims if SSA assesses an overpayment and the worker submits a written request for adjustment. The legislation became permanent effective 07/22/2007. L&I can now provide us with the full WC rate when requested and adjust State offset as needed to pay additional benefits.

7. When to protect benefit increases at age 62

DIB increases due to COLAs, PIA recalculations or recomputations, or the imposition of a combined family maximum that occur during the reverse offset period are only protected for offset computation purposes, if offset was considered for at least one month before the first reverse offset month.

For instructions on protected benefit increases during the RJ period and when to establish a new ACE and TFB in age 62 reimposition cases, see DI 52105.001G.2.

8. When we failed to remove offset in a reverse offset case

If we erroneously continued to offset benefits instead of removing offset (RJ) when we adjudicated a DIB award:

• Verify that the WC payments are either TT or PT.

• Remove offset retroactively effective the month after the calendar month of adjudication of the award per DI 52120.265F.1. in this section. Note: Reverse offset only applies up to age 62 and only when the NH is receiving TT or PT.

• Send the Washington State WC Data Sheet to L&I or to the self-insured employer.

NOTE: Do not verify that a reduction was actually applied by the State. It is sufficient that the plan provides for reverse offset. See DI 52105.001E.1.

G. Processing claims involving WA WC via MCS

When you answer “Y” to the mandatory question “REVERSE JURISDICTION INVOLVED?” on the MCS Common WC/PDB Claim Data (WPCL) Screen, you must enter a start date for reverse offset. Since the start date for reverse offset for WA depends on the claim adjudication date, the FO will not know the start date at the time you input a disability claim involving WA periodic payments through MCS.

Process disability claims involving WA WC where TT or PT payments have been awarded as follows:

1. Input the following on the WPCL Screen:

   • Is reverse jurisdiction involved? Y

   • If Yes, Start (MMDDCCYY) ______. (Input the Date of Filing plus 3 months.)

   • No Stop Date is required. However, a stop date equal to age 62 may be used.

2. Establish an issue of “WPCL” on the DW01 screen.

3. Do not input Non-Medical Completion (SPORT) or Auto-Initiate on these claims.

4. When a claim is approved, update the START date on the WPCL screen to reflect the first of the month following the month the DECI screen is completed.

5. Update the DW01 to reflect receipt of the WPCL issue and indicate the reverse jurisdiction start month in the REMARKS column.

6. Enter a 042 diary on the DECI screen and change the due date on the DIAR screen to 4 months prior to age 62.

7. If the WC/PDB data must be input via ICF WC/PDB (e.g., due to an MCS processing limitation), enter “Y” under “REVERSE JURISDICTION INVOLVED (Y/N)” and the appropriate first of the month START date on the ICF WCCD screen. For more information on ICF entries, see MSOM ICFT2 031.012.

H. When the State revises WC payments

Sometimes L&I send us an amended or corrected form SSA-1709. This usually happens when a worker’s closed WC case is re-opened on appeal. When a Pension is awarded, L&I may reopen and reverse a prior PP LS award. In this case, L&I must revise the periodic payment and LS information that they previously furnished us. L&I will attempt to redistribute the LS to any gaps in periodic payments then prorate the remainder of the LS by reducing the monthly Pension amount.

If we previously applied offset based on the now-voided PP award, process the amended form SSA-1709 as follows:

1. Use the amended Form SSA-1709 to rework the WC offset.

2. Use the unreduced PT “Pension” amount as the WC rate effective with the date of the first PT payment.

I. Verifying WC

For verifying WA WC payments, which includes contact information, follow the link for the State of Washington Department of Labor and Industries.

J. Washington State WC data sheet

Washington State WC Data Sheet. (titled “Washington State Workers’ Compensation Social Security Benefit Notification and Data Form”). When there is an allowance on a claim involving Washington State L&I, the technician adjudicating the claim must complete the Washington State WC data sheet and fax the document to WA L&I using the fax number indicated on the form.

K. Case examples

Access the following links to case examples:

1. Determining Time Loss (TT) Rates – COLA Involved

2. Pension (PT) Award

3. Permanent Partial (PP) LS Award – Paid in Installments

4. Third Party Settlement – Deducted from WC Payments

L. References

• DI 52101.005 - Social Security Amendments with Workers’ Compensation/Public Disability Benefits (WC/PDB) Offset Provisions

• DI 52105.001 - Reverse Offset Plans

• DI 52105.010 - Third Party Settlements

• DI 52150.025 - WC/PDB Offset Ending Date

• DI 52150.030 - Considering the RIB Option

• DI 52150.035 - Determining the WC/PDB Amount Used to Compute Offset

• DI 52150.050 - Excludable Expenses

• DI 52150.060 - Prorating a WC/PDB Lump Sum

• DI 52145.015 - Retention of WC/PDB Proofs

• MSOM ICFT2 031.012 ICF WC/PDB Offset - Claim Data (WCCD)

• Washington State Department of Labor & Industries