Part 1 of this blog dealt with how weekly workers’ compensation benefits and monthly Social Security Disability benefits can offset each other. But what happens if you settle your workers’ comp case?
In Part 1, we used an exmaple of someone in an “offset situation.” That individual was receiving both weekly workers’ comp benefits at the rate of $500 per week, and a monthly SSD check for $633.35. In this example, his full SSD rate, or PIA, was supposed to be much higher, at $1,200 per month. But, because of his receipt of weekly workers’ comp checks, he was in offset, and thus, his SSD benefit was reduced.
If this individual were to “settle” his workers’ comp case, he would cease to receive a weekly workers’ comp check. Rather, he would receive a final lump sum cash payment to close out/settle his case. The question then becomes, what effect does this settlement have on his ongoing Social Security Disability benefit.
If done properly, the employee’s attorney will take the necessary steps on the workers’ compensation settlement papers to ensure that any future offset going forward is either minimal, or eliminated completely. This is done by doing what is known as a “Sciarotta Allocation.” A Sciarotta Allocation is a process in which the settlement amount is prorated over the Employee’s life expectancy. The is done to create a small “compensation rate” post settlement. With as small a compensation rate as possible, this will serve to create a minimal offset against the employee’s SSD monthly benefit, going forward.
Any time an employee settles his Workers’ Compensation Case under M.G.L. Chapter 152, Section 48, his or her attorney must prepare a number of settlement documents; most notable is a DIA Form 117. The Form 117 essentially sums up the terms of the settlement, which the DIA Administrative Judge then reviews to determine if this settlement is in the best interest of the Employee.
A Sciarotta Allocation is done on the second page of the Form 117. At the top right hand corner of page 2 of this form, there is a spot to list the Employee’s “Compensation Rate.” If the Attorney were to list the Employee’s full weekly rate, then Social Security would continue to offset the Employee based on this rate. This would, in turn, keep that individual in the same offset situation as they were pre-settlement. You do not want to do this.
As a result of the holding in Sciarotta v. Bowen, practitioners are allowed to take the settlement amount and prorate it over the employee’s life expectancy. Note, there are various sources of life expectancy figures. There is a fair degree of leeway in which figure is used, as most charts are rather consistent in their life expectancy figures. Once you determine the employee’s life expectancy figure, you would simply take the gross lump sum amount and divide it by their life expectancy figure (in weeks), to get a weekly compensation rate post settlement. This lower figure will then be used on page 2 as “compensation rate” figure.
There is one final step, however. Recent practices at the Department of Industrial Accidents and the Social Security Administration require an explanation of how the attorney arrived at their Sciarotta rate. This is done in the narrative portion of the lump sum papers. All that is required is a sentence or two explaining which life expectancy figure was used, and that the Employee’s compensation rate has been prorated pursuant to the holding in Sciarotta v. Bowen.
Referring to our example above, let’s assume that this employee was 45 at the time of the settlement and were to settle his case for $100,000 (gross). According to one life expectancy chart, this individual would have a remaining life expectancy of 33.33 years, or 1,733.16 weeks. You would then divide the gross amount (100,000) by the weekly life expectancy (1,733.16). This would result in a weekly “prorated compensation rate” of $57.70 per week.
So, as a result of this settlement and the Sciarotta allocation, post settlement, this employee will no longer be offset at the rate of $500 per week, as he was pre-settlement. Rather, he will be offset at the much lower rate of $57.70 per week, or $250.03 per month.
Recall from Part 1 of this blog, the 80% ACE figure sets the limit of what one can receive in workers’ comp and SSD. In our example, this figure was $2,800 per month. His full SSD rate is $1,200 per month, plus his new monthly compensation rate of $250.03. Adding the two gives us $1,450.03. This figure is well within the 80% ACE figure/cap. Thus, this employee can receive his full PIA rate of $1,200 per month and is no longer in any offset.
As mentioned before, the interplay between Workers’ Compensation and Social Security Disability can be somewhat complex. It is important to have an attorney who is experienced in these areas, to ensure that you rights are protected. At Troupe Law Office, we have over 40 years of experience in these fields. Please visit our web site at https://www.troupelawoffice.com for more information. Or, call us at (978) 531-7401. We offer free consultations for all cases.