Indemnity Offsets: The MN Supreme Court Narrows Minn. Stat. 176.101, subd. 4 and the Insurer’s Ability to Offset Benefits Based on Public Retirement Benefits
Two Supreme Court opinions work in tandem to clarify when an employer and insurer may offset workers’ compensation indemnity benefits when an employee is also receiving non-workers’ compensation benefits. In short, if the non-workers’ compensation benefits received by the employee are not one of those provided under the federal Social Security Act, the likelihood of a successful offset is slim.
Ekdahl v. Independent School District No. 213, ___ N.W.2d ___ (Minn. 2014)
In Ekdahl, the Supreme Court examined whether an employer and insurer are entitled to offset permanent total disability benefits, after the first $25,000.00 has been paid, when an employee is concurrently receiving payments from a Teachers’ Retirement Association (“TRA”) account. The compensation judge found that it was inappropriate to apply the offset. The WCCA reversed, holding that both programs were part of a general system of wage loss restitution. The Supreme Court ultimately disagreed with the WCCA. Its holding is primarily based on its interpretation of Minn. Stat. § 176.101, subd. 4.
The Supreme Court rejected the WCCA’s interpretation of Minn. Stat. 176.101, wherein that court held that the benefits available extended beyond federal social security, and held instead that the phrase “old age and survivor insurance benefits” applies only to federal social security benefits available under the Social Security Act. The Court reasoned that when the compensation statue was enacted in 1953, the phrase “old age and survivor insurance benefits” only applied to benefits under the Social Security Act. The Court argued that while the word “any” was added in front of “old age and survivor insurance benefits” in 1967, that modifier was added only to indicate that all of the new federal social security programs available under the Social Security Act should be included.
The Court’s decision appears to rest on the fact that the TRA benefits were retirement benefits and not disability benefits. It’s hard to predict whether they would have rejected the offset if the teacher’s benefits were strictly related to the employee’s disability.
Hartwig v. Traverse Care Center and Minnesota Counties Intergovernmental Trust, ___ N.W.2d ___ (Minn. 2014)
In Hartwig, the Court examined whether an employer and insurer are entitled to offset permanent total disability benefits, after the first $25,000.00 has been paid, when an employee is concurrently receiving payment from a Public Employees Retirement Association (“PERA”) annuity. Both the compensation judge and the WCCA concluded that an employer and insurer are entitled to reduce the amount of permanent total disability benefits paid by the insurer by the amount of the employee’s PERA retirement annunity. The Supreme Court disagreed.
The compensation judge relied on the language of § 176.101, subd. 4, and Minn. R. 5222.0100, subp. 4, which defines government benefits, to find that the PERA annuity was a government benefit and therefore an offset was justified. The WCCA relied on its past decisions in Kramer v. City of St. Paul, 33 W.C.D. 425 (W.C.C.A. 1981) and Adamski v. Kenneth Setterholm’s Farm, 56 W.C.D. 119 (W.C.C.A. March 19, 1998) to hold that when the legislature amended the statue in 1967, they implicitly intended the offset to apply to any government old age benefits, including service pension retirement benefits. The Supreme Court summarily rejected each of these arguments and instead relied solely on its Ekdahl decision issued earlier in the day.
By relying on Ekdahl, the Court has rejected a long line of WCCA opinions interpreting Minn. Stat. § 176.101. In their place, the Court has determined that “old age and survivor insurance benefits,” refer “only to federal social security benefits received by an injured worker pursuant to the Social Security Act, 42 U.S.C. §§ 401-34 (2012).”