QUESTION
Our office previously determined that the agency should recognize Alaska's reverse
offset provision. We now address how to implement Alaska's reverse offset provision
to each of the various Workers Compensation (WC) payment types as specified both in
Alaskan law and the agency's Program Operations Manual System (POMS), i.e., temporary
total, temporary partial, permanent partial impairment, permanent total, and reemployment/vocational
rehabilitation benefits.
ANSWER
It is our opinion that the agency should recognize Alaska's reverse offset provision
when processing temporary total, temporary partial, and permanent total WC payments.
However, the agency should ignore Alaska's reverse offset provision when processing
permanent partial impairment and reemployment/vocational rehabilitation benefits,
and use the federal offset instead.
ANALYSIS
1. Applicable Federal Law
As discussed in our previous memorandum, the agency shall ordinarily reduce, or "offset,"
a number holder's (NH) Title II disability benefits if he or she also receives state
WC benefits. See 42 U.S.C. § 424a(a). WC benefits subject to federal offset include total or partial
disability benefits, "whether or not permanent." See id. The United States Congress enacted the Title II offset provision to create a benefits
"ceiling" that would prevent individuals from obtaining more than 80% of their average
current earnings. See Siaperas v. Montana State Compensation Insurance Fund, 480 F.3d 1001, 1004 (9th Cir. 2007). Congress implemented the 80% limit "out of
concern that workers might be discouraged from returning to work if their combined
federal and state benefits exceeded 80% of their [earnings]." Id., citing Richardson v. Belcher, 404 U.S. 78, 82-83 (1971).
However, the Agency shall not offset Title II disability benefits if a state has already
adopted a reverse offset provision enacted on or before February 18, 1981. See 42 U.S.C. § 424a(d). This exemption prevents a NH from being subject to a simultaneous
federal offset and state reverse offset of his or her benefits. See S~, 480 F.3d at 1003-04./ If a state has not enacted a reverse offset provision by February
18, 1981, then the federal offset applies. With respect to Alaska's reverse offset
provision, we previously determined that Alaska's provision met the federal criteria
for offset exemption. See AS § 23.30.225(b).
The Sixth Circuit noted Congress's reason for enacting the February 18, 1981 deadline.
See Merz v. Sec'y of HHS, 969 F.2d 201, 206 (6th Cir. 1992). After Congress enacted the federal offset exemption
in 1965, approximately one-third of all states had shifted part of their WC burden
to the agency. See M~, 969 F.2d at 206, citing Arthur L~, 4 The Law of Workmen's Compensation § 97.35(a) (1990). In 1981, the Senate Budget
Committee "expressed concern in reducing federal spending in order to effectively
combat high inflation and unemployment." M~, 969 F.2d at 206, citing S.Rep. No. 97-139, 97th Cong., 1st Sess. 3-4 (1981). Accordingly,
Congress provided "that all states which did not then [in 1981] have in effect a reverse
offset provision were forever foreclosed" from taking advantage of the federal offset
exemption. See M~, 969 F.2d at 206.
Section 424a(d) states that the Agency shall not take its federal offset "if the [WC
provision] under which a periodic benefit is payable provides for the [reverse offset
reduction] . . . and such law or plan so provided on February 18, 1981." 42 U.S.C.
§ 424a(d). The section does not specify whether the various WC payment provisions
in any given state must individually provide for a reverse offset, or if a general
reverse offset may apply. We believe given the legislative history of section 424a(d)
that the agency can properly analyze the federal offset exemption with respect to
Alaska's WC payment provisions, below.
2. Alaska's Five WC Payment Types
The POMS currently recognizes five different types of Alaska WC payments: (1) temporary
total, (2) temporary partial, (3) permanent partial impairment, (4) permanent total,
and (5) reemployment/vocational rehabilitation benefits. See POMS DI § 52120.010(B). Again, we previously determined that Alaska's reverse offset
provision met the federal criteria for offset exemption. See 42 U.S.C. § 424a(d); AS § 23.30.225(b). However, if a state has amended or expanded
its reverse offset provision after February 18, 1981, then the agency shall not recognize
the amended or expanded methodology for purposes of calculating offsets. See 20 C.F.R. § 404.408(b)(2)(i); POMS DI § 52105.001(F)(1). In such cases, the agency
would generally recognize the original provision and ignore the additional provision(s).
See 20 C.F.R. § 404.408(b)(2)(i).
The Alaska legislature has not substantively amended or expanded its reverse offset
provision since 1981. However, the Alaska legislature has made several changes to
each of the five WC payment types described above. Thus, we examined the legislative
history regarding each of Alaska's WC payment types to determine how Alaska's reverse
offset provision would apply.
a. Alaska WC Payment Types That Meet the Federal Offset Exemption: Temporary Total,
Temporary Partial, and Permanent Total
The Alaska legislature enacted its provisions for temporary total, temporary partial,
and permanent total WC payments in 1959. See AS §§ 23.30.180, 23.30.185, 23.30.200; and SLA 1959, ch. 193, §§ 7(1-2), 7(5). The
Alaska legislature amended these provisions twice after February 1981, namely, in
1983 and 1988. See SLA 1983, ch. 70, §§ 5-6, 8; SLA 1988, ch. 79, §§ 31-33, 35-36. However, these amendments
did not affect the reverse offset provision already enacted in 1977. See AS § 23.30.225(b); and SLA 1977, ch. 75, § 9./ Accordingly, we believe that these
WC payment types meet the federal offset exemption, and the agency should implement
Alaska's reverse offset when processing disability cases involving these WC payments.
b. Alaska WC Payment Types That Post-Date the Federal Offset Exemption: Reemployment/Vocational
Rehabilitation Benefits
Alaska did not enact its provision for reemployment/vocational rehabilitation benefits
until 1982. See AS § 23.30.041 (rehabilitation of injured workers); SLA 1982, ch. 93, § 3 (enacting
AS § 23.30.041 on June 14, 1982, effective July 1, 1982). Accordingly, Alaska could
not have provided for any reverse offset of this WC payment type on February 18, 1981,
because this particular WC plan did not exist. Thus, we believe that Alaska's reverse
offset provision does not apply to reemployment/vocational rehabilitation benefits,
and the agency should take the federal offset against such benefits.
The legislative history to 42 U.S.C. § 424a(d) supports our position. Congress intended
"that all states which did not then have in effect a reverse offset provision were
forever foreclosed" from taking advantage of the federal offset exemption. See M~, 969 F.2d at 206. However, Congress did not intend to confer exclusive authority
to determine benefits levels to the states that met the exemption. See, e.g., S~, 837 F.2d at 138-40 (finding that Congress did not intend to preclude any federal
offset as long as a state took any reverse offset, however minimal); and Swain v. Schweiker, 676 F.2d 543, 545-46 (11th Cir. 1982) (holding that even if an offset exemption
applied, the agency may deduct the federal offset until the state began to take its
reverse offset). Thus, we believe that even if a state had an existing reverse offset
provision, that state could not later introduce additional WC provisions subject to
the reverse offset.
A literal interpretation of section 424a(d) also supports our position. The federal
offset exemption only recognizes WC plans in "which a periodic benefit is payable"
that also provided for a reverse offset on or before February 18, 1981. See 42 U.S.C. § 424a(d). In other words, both the reverse offset provision as well as
the particular WC payment provision must have existed on or before February 18, 1981.
Otherwise, a state that had a valid reverse offset provision could exploit an unintended
loophole in the exemption whereby the state could establish future WC payment types
not subject to federal offset. Again, federal courts have rejected interpretations
of section 424a(d) that would lead to "implausible results," such as the situation
described here. See S~, 837 F.2d at 138-39. Congress clearly invoked the February 18, 1981 deadline to protect
the agency against states' subsequent attempts to reclaim larger shares of their compensation
obligations. Accordingly, we believe that a state WC plan that did not exist before
February 18, 1981 - in this case, Alaska's reemployment/vocational rehabilitation
benefits - does not qualify for the federal offset exemption.
c. Alaska WC Payment Type That Was "Repealed and Reenacted" After the Federal Offset
Exemption Deadline: Permanent Partial Impairment
The Alaska legislature enacted its WC provision for permanent partial impairment in
1959. See AS § 23.30.190; and SLA 1959, ch. 193, § 7(3). The legislature subsequently amended
the provision in 1983, and then "repealed and reenacted" the provision in 1988. See SLA 1983, ch. 70, § 7; SLA 1988, ch. 79, § 34. Substantively, the 1983 amendment
increased benefits payments to the various impairments identified in the provision.
See SLA 1983, ch. 70, § 7. In 1988, the Alaska legislature removed the list of identified
impairments and instituted a new compensation formula based on the individual's percentage
of whole-person impairment according to the American Medical Association's guidelines.
See SLA 1988, ch. 79, § 34 (". . . the compensation is $135,000 multiplied by the employee's
percentage of permanent impairment of the whole person."). Subsequent amendments clarified
how the WC program would implement updated American Medical Association guidelines,
and also increased the base compensation rate. See SLA 1997, ch. 4, § 1; SLA 2000, ch. 105, § 17 (". . . the compensation is $177,000
multiplied by the employee's percentage of permanent impairment of the whole person.").
Admittedly, this situation presents little material distinction between amending a
statute versus repealing and reenacting a new statute. As discussed above, the Alaska
legislature amended its WC provisions for temporary total, temporary partial, and
permanent total disability payments. These amendments merely adjusted the total compensation
which individuals would receive and, in fact, increased their WC payments. See SLA 1983, ch. 70, §§ 5-6, 8; SLA 1988, ch. 79, §§ 31-33, 35-36. Similarly, the Alaska
legislature essentially instituted only compensation-related changes to its permanent
partial impairment provision after 1981. See SLA 1983, ch. 70, § 7; SLA 1988, ch. 79, § 34.
Presumably, the agency would have no objection to a state's intention to increase
its own WC payments, even if those payments were subject to reverse offset. The agency
only ignores amendments to the reverse offset provision after February 18, 1981, and
not necessarily the specific WC payment plans to which the reverse offset applies.
See 20 C.F.R. § 404.408(b)(2)(i); POMS DI § 52105.001(F)(1). Thus, if the Alaska legislature
had simply amended the provision instead of repealing and reenacting the provision,
we may have recommended that the agency utilize Alaska's reverse offset when computing
permanent partial impairment benefits.
Nevertheless, we believe that repealing and reenacting its permanent partial impairment
provision after 1981 disqualified Alaska from taking a reverse offset. Again, the
federal offset exemption only recognizes WC plans in "which a periodic benefit is
payable" that also provided for a reverse offset on or before February 18, 1981. See 42 U.S.C. § 424a(d). Thus, a state legislature's decision to repeal and reenact a
statute in 1988 means that statute did not exist on February 18, 1981. Consequently,
a periodic benefit that did not exist until 1988 was not payable on or before the
applicable deadline.
As previously discussed, the legislative history behind the February 18, 1981 deadline
showed that Congress intended to prevent states from enacting additional reverse offset
provisions if they had not already taken advantage of the federal exemption. See M~, 969 F.2d at 206. We believe that Congress also intended to prevent states that already
had existing reverse offset provisions from adding further WC payment types subject
to reverse offset. Thus, a WC provision enacted after February 18, 1981, fails to
meet section 424a(d)'s deadline.
CONCLUSION
It is our opinion that the agency should implement Alaska's reverse offset when computing
temporary total, temporary partial, and permanent total WC payments. However, the
agency should ignore Alaska's reverse offset when computing permanent partial impairment
and reemployment/vocational rehabilitation benefits.