Does a Pension reduce worker’s comp benefits in Pennsylvania

When you are getting Workers’ Comp, you might be let go and start receiving a pension from your employer. When you get a pension paid by the same employer at the same time as Workers’ Comp, do they still need to pay you the full value of your Workers’ Comp claim, or can they reduce your benefits?

In Pennsylvania, we have a rule that allows employers to reduce your Work Comp benefits if they are already paying you a pension. This allows them to reduce the benefits for occupational disease or wage-loss benefits but not the benefits they pay you for scarring, amputations, lost function, lost eyesight, or lost hearing. Additionally, if the employer paying the pension and the Workers’ Comp are not exactly the same company, but one is a subsidiary of the other, the offset might still apply under Commonwealth Court precedent.

For a free evaluation of your case, call Cardamone Law’s Certified Pennsylvania Workers’ Compensation Lawyers at (267) 651-7945.

What is the Rule on Pension Offsets for Workers’ Comp Benefits in Pennsylvania?

Under § 204(a) of the Workers’ Comp Act, an employer is allowed to “offset” their payments under Workers’ Comp based on certain programs and payments the injured worker already receives. This applies to unemployment benefits, which often means that it is not worth it to get unemployment and Workers’ Comp at the same time. However, there is also an offset for severance payments, pensions, and Social Security.

The typical rule assumes that the employer is directly paying the severance or pension and therefore shouldn’t have to pay the worker twice. With Social Security payments, the offset only applies when the benefits start coming in after (and likely because of) the injury; it doesn’t apply if you are an older worker who was already receiving Social Security before your injury.

What this means, in a practical sense, is that you cannot double dip and get paid twice by your employer/previous employer. If you leave that job or get fired and start drawing on a pension or severance paid by that employer, then they get to subtract that money they are already paying you out of what they pay you under Workers’ Comp.

Ruling of the Commonwealth Court in Stepp v. WCAB

In Stepp v. WCAB (2014), the Commonwealth Court decided whether an employer may take an offset against a claimant’s Workers’ Compensation benefits under Section 204(a) of the Pennsylvania Workers’ Compensation Act for pension benefits funded by its wholly-owned subsidiary. In this case, the Commonwealth Court found that yes, an employer can take an offset against what they have to pay out in Workers’ Comp benefits based on the fact that they are already paying the claimant a pension through a subsidiary.

The claimant began working for Marianna Scenery Hill Telephone Company in January 1973. In 2000, FairPoint acquired Marianna. The claimant continued to be an employee of Marianna, but the human resources department for all employees of all FairPoint subsidiaries was managed by FairPoint. It appeared that all employees in the FairPoint “family of subsidiaries” were covered by the same Workers’ Compensation plan or policy.

The claimant argued that the Workers’ Compensation Appeal Board (WCAB) and Judge erred in granting FairPoint an offset for the claimant’s pension under § 204(a) of the Act because Marianna funded the pension plan. The claimant argues that FairPoint is not entitled to an offset for a pension plan funded by a different but still existing corporation.

In 1996, the legislature, in an effort to combat rising Workers’ Compensation costs, amended 204(a) of the Act to allow employers an offset against Workers’ Compensation benefits for Social Security, severance, and pension benefits simultaneously received by an employee. Note that the court reminded us that the party seeking to change the status quo in a Workers’ Compensation case bears the burden of proof. Here, it’s the employer’s burden.

The claimant did not challenge the factual finding of the Workers’ Comp Judge that Marianna funded 95.71% of the claimant’s pension. Instead, the claimant asserted that the Board erred because FairPoint, not Marianna, is “directly liable” for the payment of his Workers’ Comp benefits. As such, the argument is that only Marianna, not FairPoint, is entitled to the § 204(a) offset.

The court pointed to § 1929 of the Business Corporation Law of 1998 to highlight that when corporations merge, the surviving corporation succeeds to both the rights and liabilities of the constituent corporation. While this wasn’t a merger governed by § 1929, the principles have direct application pursuant to prior case law, such as the LTV Steel Co. case.

How This Case Affects the Rule

This case, first of all, affirmed the rule that an offset is the proper way to handle things. In doing so, they make sure that workers and Allentown Workers’ Compensation lawyers understand that when you get a pension and Workers’ Comp benefits at the same time, the Workers’ Comp benefits are reduced.

From the facts of this case, you may be able to tell that the situation was a bit confusing, given that the worker’s employer was part of another company after a merger. That was a core focus of this case, and the court had to parse out whether the subsidiary company was the only one who could get the offset, or whether the parent company could as well. They ultimately found that the parent company did get to use their subsidiary’s offset at the end of the day, leaving the worker with reduced benefits.

This first point is important to all Workers’ Comp claims involving pensioners, but the second part is more of a technical matter that only affects some cases and is more important for your lawyer to understand. However, given the rate at which companies merge and buy out other companies today, it is becoming more and more likely that this rule from Stepp will come to affect your Workers’ Comp benefits.

How Much Does a Pension Reduce My Workers’ Comp Benefits in Pennsylvania

Section 204(a) actually has two different rates of offset depending on the types of benefits involved. When it comes to unemployment benefits, severance, or pensions, 100% of the payment is credited against what the employer has to pay for Workers’ Comp, vs. only half of the “old age” benefits under Social Security are subtracted from the Workers’ Comp benefits. However, this credit for pensions only applies to some of your benefits.

Different benefits are paid under different sections of the Workers’ Comp Act: § 108 deals with occupational diseases, § 306 deals with wage-loss benefits while you cannot work or work at a reduced rate, and § 306(c) deals with benefits paid for “specific loss.” Occupational disease benefits are paid on account of conditions like black lung, mesothelioma, and more, whereas § 306’s wage-loss benefits are paid on account of most injuries. Section 306(c)’s specific loss benefits are paid for permanent loss of a limb, lost function in that limb, lost eyesight, lost hearing, and facial scarring.

The pension offset only applies to benefits paid under § 108 or § 306, but not benefits paid for specific loss. This means that the weekly or bi-weekly checks you get to replace your wages or cover your occupational disease might be reduced, but they cannot reduce the money you get paid for permanent injuries, lost sight/hearing, or facial scarring. Those parts of your benefits still need to be paid at the full value, even if your pension would have otherwise totally offset your employer’s Workers’ Comp burden.

Do Pensions from Other Employers Reduce Workers’ Comp Benefits in Pennsylvania?

These rules about reducing your Worker’s Comp benefits only apply when your pension and Workers’ Comp benefits come from the same employer (or a similarly situated employer under the rule from Stepp). If you have a pension from a previous employer who is not a subsidiary of your current employer, then it should not reduce your Workers’ Comp benefits.

The whole point of Workers’ Compensation is that the employer you were working for when you got injured is supposed to pay you for your lost wages and medical expenses. If you were already drawing a pension from another employer or – now that you are laid up with an injury – you begin drawing on another employer’s pension while getting benefits, that has nothing to do with how much this employer owes you for your injuries. As such, they do not get to claim an offset and have to pay you full benefits (unless some other offset applies).

Call Our Workers’ Comp Lawyers in Pennsylvania Today

Call (267) 651-7945 for a free case evaluation with the Philadelphia Workers’ Comp attorneys at Cardamone Law.