Retroactive Recoupment of Overpayment Allowed in PA Workers’ Comp

In 1996, major changes were made to the Pennsylvania Workers’ Compensation Act. One of them was providing a credit to the workers’ compensation insurance carrier for unemployment compensation benefits, “old age” (their words, not ours!) Social Security benefits, and pension and severance benefits (to the extent funded by the employer directly responsible for the payment of the workers’ compensation benefits). We occasionally see litigation on when an offset can be taken, and in what amount.

A previous decision by the Commonwealth Court of Pennsylvania in 2007, called Maxim Crane Works v. Workers’ Compensation Appeal Board (Solano), denied a workers’ compensation insurance carrier a retroactive credit for Social Security retirement benefits. This was because the insurance carrier failed to send a form to the injured worker called “Employee’s Report of Benefits for Offsets.” By not sending this form to the injured worker every six months, the Court reasoned, the delay in knowing of the existence of the Social Security retirement benefits was the fault of the insurance carrier. An ongoing credit was permitted, but retroactive was not.

Recently, there was another issue with the application of a retroactive credit, this time regarding a pension plan. In City of Pittsburgh v. Workers’ Compensation Appeal Board (Wright), the injured worker was a firefighter who hurt his right knee fighting a blaze. When the knee did not heal, the injured worker filed for a disability pension from his employer, the City of Pittsburgh. Oddly, because the injured worker first received “Heart and Lung benefits” (a program for police, fire and related professions), the Notice of Compensation Payable was issued about two weeks AFTER the disability pension was requested.

After paying the workers’ compensation benefits for about a month or so, then workers’ comp insurance carrier filed a “Notice of Workers’ Compensation Benefit Offset,” and advised the injured worker that, based on the disability pension, his workers’ comp benefits would be reduced to $555.76 weekly, due to an offset of $134.24, for the present and into the future. Additionally, since there was an overpayment from the start of the payment of workers’ comp benefits, the injured worker was advised that another $100.00 would be deducted from the injured worker’s weekly workers’ comp payment until the overpayment was recouped.

Eventually, the injured worker filed a Petition for Review, alleging that no credit could be taken since he was never sent an Employee’s Report of Benefits for Offsets. The injured worker also alleged that the recoupment for the past overpayment could not be taken, given the decision in Maxim Crane. The injured worker presented evidence to the Workers’ Compensation Judge (WCJ) that the pension was not properly calculated, and that the recoupment of the overpayment was prejudicial to him.

The WCJ granted the Review Petition in part. Specifically, the WCJ agreed with the ongoing offset (rejecting the actuarial evidence offered by the injured worker). An Employee’s Report of Benefits for Offsets need not be issued before the offset is taken if the Employer is already aware (as here) of the pension. However, the WCJ agreed with the injured worker regarding the recoupment of the retroactive offset, and ordered that be repaid to the injured worker. Claimant’s testimony regarding the prejudice caused by the recoupment was accepted by the WCJ.

The Workers’ Compensation Appeal Board (WCAB) affirmed the decision of the WCJ, though on a different basis – the WCAB determined that issuing an Employee’s Report of Benefits for Offsets was required prior to taking an offset. However, in this situation, the WCAB determined the correct result was to allow the ongoing offset, while denying the retroactive relief.

The Commonwealth Court of Pennsylvania first noted that the basis for these changes to the PA Workers’ Compensation Act was to prevent double recoveries, which the Court believed this to be. Language actually in the Act, said the Court, allows the offset to be taken without issuing an Employee’s Report of Benefits for Offsets (though the issue was not stated directly). As to the retroactive offset, the Court distinguished Maxim Crane. The Court noted that the delay in knowing of the offset in Maxim Crane came because the insurance carrier failed to send the injured worker an Employee’s Report of Benefits for Offsets, which it should have done every six months. Also noted was the fact that the insurance carrier in the Maxim Crane case sought two years of retroactive benefits (and here was just a month or so). The Court further noted that the Act expressly mentions retroactive application of the offset. Thus, ultimately, the Court determined that the offsets, both present/future and retroactive, were appropriate, and the Review Petition should have been denied.

While we understand the decision regarding the present/future offset (it seems to make little sense to require an Employee’s Report of Benefits for Offsets if the Employer already knows of the offset), the allowance of the retroactive recoupment is more troubling. First, the Court paid little attention to the finding of the WCJ that the injured worker was prejudiced by the further reduction (and we know that a WCJ is the ultimate finder of fact). Second, the Employer knew of the pension request BEFORE it even began payment of the benefits. Therefore, the overpayment here was the sole fault of the Employer, yet the injured worker suffers the consequences