What Is A Benefit Offset? Is An Employer Entitled to Make Deductions From Workers’ Compensation Payments?

What Is A Benefit Offset

What Is A Benefit OffsetIf you as an employer are paying an employee disability benefits resulting from work-related injuries, you need to know what a benefit offset is, and how it may affect the pay out.

A benefit offset under workers’ compensation is an offset that the employer may apply to the workers’ compensation disability benefits it is obligated to pay  “for any type of pension benefits [that the employee is receiving] to the extent that [the employer] funded those benefits.”

For example, an employer may make a deduction from the benefits it is required to pay its employee due to an accepted work injury, if the employee is  simultaneously receiving benefits or other forms of payment from social security (old age),unemployment compensation, severance, and pension benefits.

Many think that this is unfair, as disability from a work injury may put a person out of work for extended periods of time. Because they are unable to bring in a steady income, the injured worker must rely on any form of disability or other benefit payments they can get.

However, in their ruling on the recent case of Gelvin v. WCABthe Pennsylvania Commonwealth Court held that employers are, in fact, permitted to take a benefit offset unilaterally, without obtaining an executed agreement or order, provided it exercises the appropriate due diligence.

In this case, the Claimant, a Pennsylvania State Trooper by the name of Stacy Gelvin, filed for disability benefits resulting from work-related post-traumatic stress disorder. After she filed her workers’ compensation claim, in December of 2006 her employer accepted liability for the injury and filed a Notice of Compensation Payable (NCP).

After receiving benefits from her employer for several years, Ms. Gelvin applied for disability pension benefits. These benefits kicked in on February 29, 2012, and were retroactive to February 2011, the date on which she applied for the pension benefits.  Ms. Gelvin received a lump sum payment to reflect this amount.

Immediately upon receiving notice of Ms. Gelvin’s application for these benefits, her employer issued a Notice of Workers’ Compensation Benefit Offset. This Notice informed Ms. Gelvin that her employer would suspend payment of workers’ compensation disability benefits for one year to recover their overpayment of workers’ compensation benefits, as they were entitled to an offset for the amount she received in pension benefits.

While Ms. Gelvin believed that the suspension of these benefits was unfair causing her an undue hardship as it led to her inability to pay her bills for that year, the Commonwealth Court ruled that her employer was justified in suspending her benefits, and did not violate the Workers’ Compensation Act in doing so.

The Gelvin case addresses the duties of both the employer and the employee under Pennsylvania law when a benefit offset is involved.  The case gives a  clear outline of the procedures to be followed by both.

It is important to know that the employee must notify the employer when it receives additional benefits under social security (old age), unemployment compensation, severance, and/or their pension.  However, the employer is also under a duty to first notify the employee that they have this obligation.  It is extremely important to remember that the employer must exercise due diligence and supply the employee with a form (LIBC-756) every 6 months notifying the employee that they have to report the new benefits.

Contact Greenbaum & Pinto to receive helpful guidance workers’ in defending workers’ compensation claims.