Workers’ Compensation Offset of Social Security Retirement Benefits – Can it be stopped?

THE HISTORY:  In Washington State the workers’ compensation system has been offsetting a claimant’s receipt of social security retirement benefits since 1986.  Social Security disability benefits have been offset since the 1970s, but it took a while longer to implement an offset to retirement benefits.  All injured workers who were not on Social Security Retirement in July 1986 have had their later entitlement to retirement benefits subject to the potential for offset.

Generally the offset is calculated based on either a worker’s average current earnings (ACE) or their time loss rate.  The average current earnings are calculated based on the highest calendar year earnings of the worker divided by 12 to find an average month.  The offset is then calculated by taking 80% of the ACE.  That figure represents the maximum beyond which the combination of SS retirement and worker’s compensation benefits cannot exceed.  Since a worker’s compensation cannot be reduced because of the offset, if that 80% figure is below the time loss rate, then the time loss rate will be used to calculate the “cap”.  In that latter case all of the retirement benefits are subtracted from the time loss benefit and the worker receives no increase due to the entitlement to retirement benefits.  Where the ACE is higher than the time loss rate, then the workers’ compensation benefits are reduced to the point where the retirement benefits plus the workers’ compensation benefits equal the ACE figure.  In that case the worker receives more money than on workers’ compensation alone, but still at a reduced rate due to the social security offset.  There are periodic cost of living adjustments provided, either yearly for those whose time loss rate is the basis for the offset or every three years if the ACE is the basis for the offset.  [Yes, it is complicated!]

The offset was challenged as being in violation of the Washington State constitution but that was rejected by the Washington Supreme Court in 1993.  A recent challenge to a similar law in Utah was successful as the Utah Supreme Court found it violated the Utah and U.S. Constitutions (exactly the opposite decision from Washington’s court some 16 years earlier).  It is unlikely the Washington Court would be willing to revisit that issue having already considered and ruled on the issue, despite the different outcome in Utah.

CAN THIS BE FIXED?  A bill has been introduced in the Washington Legislature (HB 1211) to repeal the retirement offset.  That bill has yet to gain any real traction despite being introduced again this year.  Representative Steve Kirby (D-Tacoma) is the only sponsor of the bill and remains committed to its passage, but without more support the bill is unlikely to move forward.  The Legislature is out of session for the year and meets in short session next year.  Although economic times are tough for the state, they are also tough for those workers’ on time loss or pension benefits and who are having their hard earned retirement benefits from social security offset against their compensation benefits.

WHAT CAN YOU DO?  All legislators respond to constituents’ needs and demands in one form or another.  One call might receive a polite reply, dozens calls from different constituents might raise an eyebrow (and polite replies), hundreds of calls might reflect a groundswell, thousands of calls might reflect a movement was underway.  If every injured worker called their representative and asked them to contact Representative Kirby to become a co-sponsor on the bill (or at a minimum to otherwise support the bill) and if every injured worker called their state senator and asked them to support the bill when it gets to the Senate the bill can ultimately have a change of passage.

IS THERE HOPE?  Even with a strong groundswell from the injured worker community the bill is not assured of passage.  While it has strong support on equitable grounds (SS retirement is based on a lifetime of work and is intended to replace wages during a worker’s retirement years) and has nothing to do with disability or the disability system (which offsets workers’ compensation and SS disability to make sure a worker has incentive to return to the work force and that life will not be too comfortable – financially – on disability) the bill will have a huge fiscal impact on the Department of Labor and Industries.  On all bills filed which affect the state budgetary process the agency involved files a “fiscal note” with the Legislature advising what the financial impact will be if the legislation is passed.  While workers’ compensation benefits are not funded out of general revenues – rather from employer and worker premiums – if there is a large fiscal impact it could include the need for some premium increases or consideration thereof.  This could spook the Legislature into rejecting the bill despite large popular support from constituents.

FINAL WORD:  The bill will go nowhere despite the good intentions of Rep. Steve Kirby unless support can be generated from other legislators.  The way to start that process is to spread the word among injured workers, friends of injured workers, unions, disabled support groups, retirement groups, etc.  If those groups can get behind this bill, and should a steady groundswell rise up, the Legislature cannot ignore it.  Like all long marches, they must begin with the first step.  Rep. Kirby can be reached at: kirby.steve@leg.wa.gov.  Let him know you care.  Let you own Representative know you care.  Step up and make some phone calls, send some emails, spread the word that the time has come to pass HB 1211 and repeal the social security retirement offset from Washington State workers’ compensation benefits.

Vocational Option 2

We are about a year and a half into the 5 year pilot Vocational Improvement Project (VIP) at the Department of Labor & Industries. The Vocational Subcommittee (which I am on) continues to meet regularly. This first year has been busy with issues surrounding how to implement the changes to the vocational system, and the Department has done a good job with an overwhelming number of changes, both anticipated and not anticipated.

 The VIP has a feature which was not present in our former vocational system, for shorthand we call it “Option 2”.  Because it is new, workers have a lot of questions. Let me explain what it is, and then try to walk through some of the considerations.

 If a worker is found eligible for vocational retraining (that is, further vocational assistance is both necessary and likely to assist the worker in returning to reasonable continuous gainful employment) he or she works with a vocational rehabilitation counselor (VRC) to develop a comprehensive retraining program. This program can cost up to $12,240.00 (as of 7/1/08) and take up to two years. The vocational plan is submitted to the Department for approval. Once approved the worker has 15 days to choose one of two ‘options’.  You will receive information about these options as you progress in the plan development process, so the 15 day window should not be a surprise. You can not elect an option until your retraining program has been developed an approved. In theory, this insures you have had an opportunity to fully explore the retraining possibilities open to you, and have an exact plan developed so you are aware of exactly what the consequences of the ‘option’ choice will be.

 Option 1 – the worker participates in the plan as outlined and approved. This is the easy one, you know exactly what you are committing to.

 Option 2 – the worker declines participation in the retraining program. Time loss benefits stop. The worker is entitled to the equivalent of an additional 6 months of benefits, at the same time loss rate. The claim is closed with the appropriate permanent partial disability award.  Any time within the next 5 years the worker may use the reserved vocational retraining costs (the $12,000 plus) to pay for training or classes at any accredited or approved school or program.

 Most of the questions I field about Option 2 are whether to take it or not. I will leave for another day the questions surrounding how, and for what, the reserved vocational funds are used.  I will admit to being surprised at the number of workers who have chosen Option 2, it’s running pretty steady at around 25%. When the Subcommittee discussed including a way to ‘opt out’ of vocational retraining in this new pilot, I had in mind those workers who were at or near retirement age, were already receiving Social Security either disability or retirement, had a work history in a single occupation and who were clearly not returning to the workforce.  This was my picture of who would choose Option 2. 

 Well, I was quite wrong. The stories behind who and why workers are choosing to opt-out of the vocational process have been interesting and varied.  One very young worker wanted to retrain in a occupation which just very slightly exceeded her physical limitations. Although she believed she could do the job, the Department would not approve the retraining plan. The alternative plan, which was approved, was not exactly what she wanted to do.  She choose Option 2, got a student loan to replace the lost stream of time loss, and immediately accessed the reserved training funds to enroll in her chosen program.  Who would have thought? Several workers have chosen option 2 because their time loss rate is not enough to pay the bills. They believed their families would be better off if they found a job immediately, rather than scraping by for two years in a retraining program. Several workers talk of taking their Option 2 payout and their PPD award and starting their own business. In the end, it will be interesting to see the results of the study which will track outcomes for workers in this new VIP, including those who have chosen Option 2.

 The lesson I have learned is there is no one answer or test which will help a worker decide whether to choose Option 2 or participate in their retraining program. Every situation is different, in ways I had not anticipated.  However, there are some basic considerations which will be common to all workers. First, I ask my clients if they have a way to pay the bills when the 6 months of Option 2 payments and the PPD award are paid out. If not, then participating in retraining will keep the flow of time loss coming for the duration of the program, will provide return to work skills, and will buy some time to decide ‘what’s next’.  To those clients who say they will just go look for work, we have a frank conversation about the state of the economy and the unemployment rate in the state of Washington. If you do not have a job absolutely positively lined up, taking a pass on retraining might not be the best choice.

 You should consider your age, and whether you want to, and are able to, retire.  If you honestly have no desire or need to work, and are financially secure, then participating in a retraining program might not suit you.  On the other hand, if a you are relatively young, with years of work life remaining, this may be a golden opportunity to receive additional occupational training or education opening an entirely new chapter in your career. Choosing Option 2 and passing up this opportunity might be a mistake.

 One of the hurdles for workers at this stage of their claims is actually picturing themselves back in the work force, in any capacity. This is not a swift moving system. By the time a worker is found eligible for vocational assistance in the form of retraining they are years into their claim. Their lives have been a revolving door of physicians, surgery, therapy, testing, medical evaluations and endless appointments. Being disconnected from the workforce for such an extended period of time makes imagining a return very overwhelming. For those workers struggling with this reality, I urge you to pass up Option 2 and give your retraining program your best effort.  Just like education and training after High School can bridge the divide into the real world, this opportunity for retraining during your adulthood can bridge the gap between injury and returning to enjoyable employment.  Maybe you will get to the conclusion of your program and decide to retire. But maybe, and I believe more likely, you will get to the end of your program enthused, re-energized and optimistic about your future, with a new skill set as an added bonus.