SSA - POMS: DI 52120.125 - Michigan Workers’ Compensation (WC)

A. Types of WC payments

1. Wage loss benefits

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Temporary Total (TT)

Maximum period of payments is the duration of disability. TT is subject to reduction by unemployment and Social Security retirement benefits, and by those under an employer disability, retirement, or pension plan.

NOTE: This reduction is called “coordination” or offset of WC benefits. This does not apply to specific losses or Social Security disability benefits. For age 65 reductions there is a 5 percent reduction in weekly WC benefits at age 65 and an additional 5 percent reduction each year thereafter until the weekly benefit rate is cut in half. When a disabled worker elected RIB due to the WC offset of the DIB and WC ends at age 65, electing to receive DIB again at age 65 will normally be advantageous since the DIB benefits payable at age 65 would not cause this reduction in the WC.

NOTE: Effective December 19, 2015 or later, WC offset termination is extended from age 65 to full retirement age (FRA). See 2015 Amendment in DI 52101.005.

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Permanent and Total (PT)

Maximum period of payments is the duration of disability. PT is subject to reduction due to the receipt of state unemployment.

2. Specific loss benefits (code as PP)

Maximum period of payments is the duration of disability and there is no maximum payment amount. Specific loss benefits subject to reduction for unemployment. The worker is entitled to 65 weeks of compensation benefits regardless of whether the worker is disabled and has a wage loss.

NOTE: WC payment or check stubs sometimes show “voluntary pay” or “pay”.

B. Cost-of-living adjustments (COLAs)

Michigan does not provide for cost of living increases for any type of WC payments.

However, adjustments in the WC base payment amount can be made because the number of dependents changes (i.e. child attains age 18). Usually you will see a slight decrease in the periodic rate when an auxiliary is no longer factored into the payment amount. Also see information on differential benefits in DI 52120.125E below.

The State statute also provides that if injury occurs on or after 01/01/1982, and at that time a disabled worker is entitled to a compensation rate less than 50 percent of the State average weekly wage, after two years of continuous disability, the worker may petition for an increase.

C. Retirement insurance benefit (RIB) considerations

Michigan reduces WC payments when a disabled worker receives Social Security retirement benefits. The reduction begins at 5 percent of the weekly WC benefit, and adjusted yearly thereafter. The maximum reduction is by 50 percent.

D. Verifying WC

On April 16, 2005, the State of Michigan’s Workers’ Compensation Agency experienced a systems failure on their mainframe database which resulted in the loss of over 1.7 million records. They cannot certify information provided for claims and litigated cases filed, prior to April 16, 2005 is complete. Therefore, you need to obtain verification from the injured worker or the WC carrier for the employer. In most cases the carrier is listed on the Redemption Order. For more information on sources of verification, see DI 52145.001E.

E. Second Injury Fund - differential benefits

A worker who is totally and permanently disabled can take advantage of changes in the minimum and maximum rates of benefits. Differential benefits are the additional benefits paid to the worker and are the responsibility of the Second Injury Fund. A worker can be directly paid. If the carrier or employer pays the differential benefit, the Second Injury Fund can also reimburse the carrier.

F. Self-Insurers’ Security Fund

This fund provides workers’ compensation benefits to employees of a bankrupt self-insured employer.

G. WC settlements

Disputed WC cases are settled in the ways shown below and all are offsettable. Under special circumstances permanent disability advances are paid. For more information, see DI 52150.065 for lump sum awards involving advance payments.

1. Compromise voluntary payment

The worker accepts an employer’s offer to pay part of what the worker wanted.

2. Redemption order

A worker receives a single, lump sum payment from the employer and in return the worker gives up all future rights to workers’ compensation benefits. Redemptions are valid if they are approved by a magistrate after a formal hearing. A redemption order is a full and final settlement.

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A redemption order lists several dates of injury. The starting date for prorating these LS should be the last date of work (LDW) in which the employee was subjected to the conditions that resulted in the disability. If periodic payments are paid for that date of injury, begin the LS proration the day after periodic payments stop.
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Develop if the file does not contain evidence of the LDW from which the date of injury is determined if no periodic WC payments were made. The LDW for WC need not be the same as the DIB onset date.
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A redemption order usually includes approved expenses and can also include specified life expectancy information. Exercise care when calculating offset based on a redemption order in life expectancy situations. Along with the gross award amount and authorized expenses, judges commonly specify the proration of the lump sum award with a life expectancy rate (LE). You need to determine if the lump sum amount used in the life expectancy proration represents the amount before or after expenses. For more information, see DI 52150.065A - Life expectancy (LE) award.

3. Structured settlements

Settlements that include annuities as part of the settlement are becoming more common. Annuities also referred as a structured settlement. You must examine the redemption order itself for the exact characteristics of the settlement. Develop if you need explanation of the payment arrangement. For more information, see DI 52150.065D - Structured settlements.

4. Excludable expenses

a. Future medical expenses

Michigan WC awards often allocate 40 percent or more for future medical expenses. If this amount seems exorbitant in relation to the injury, SSA may request evidence to support such expense. Otherwise, do not develop. For more information, see DI 52150.050 - Excludable expenses.

b. Attorney fee expenses

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If the worker wins the case as the result of a trial and/or an appeal, or if benefits paid as the result of a voluntary payment, the attorney is entitled to charge a maximum fee of 30 percent of the benefits received. The maximum attorney fee, however, cannot be based upon a rate of benefits that is higher than two-thirds of the state average weekly wage. This means that if the worker is receiving the maximum benefit which would be 90 percent of the state average weekly wage, the attorney must calculate the fee as if the worker was only receiving an amount equal to two-thirds of the State average weekly wage.
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For redemption settlements, if the case is settled before the trial is completed, the fee is limited to 15 percent of the amount of the settlement if it is for less than $25,000. If the settlement is more than $25,000, the maximum fee is 15 percent of the first $25,000 and 10 percent of the amount over that. If the trial was held and completed and the case is later settled through a redemption, the attorney is entitled to a fee of 20 percent.
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10 percent allowed on compromise voluntary payment settlements.

c. Other expenses

Redemption orders typically include standard language for a deduction of $100.00 statutory redemption fee. Treat this like any other excludable expense. Redemption orders can also specify approved legal expenses and medical expenses not paid by the employer.

H. Disputes during appeal before WC Appellate Commission

Disputes are usually first handled at a mediation hearing by a mediator. If the dispute is not resolved at the mediation hearing, the case can go before a worker’s compensation magistrate. The magistrate does not ordinarily issue a decision. Instead the magistrate writes a formal opinion. If the parties disagree with a magistrate’s formal opinion, they file an appeal to the Worker’s Compensation Appellate Commission.

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If the magistrate ordered the payment of benefits to the worker, the employer must begin paying current weekly benefits at the rate of 70 percent of the benefits ordered. These benefits are paid while the case is being appealed.

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Give the worker the option of the offset computed at 70 percent or 100 percent of the WC rate.

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Advise the worker of possible overpayment if the worker wins the appeal and elects the 70 percent.

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If the worker wins the case, the worker receives the remainder of the benefits.

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If the worker loses the case, the Second Injury Fund reimburses the employer. The worker is not required to repay. This applies only to benefits that are payable beginning with the date of the magistrate’s decision and continues until the case is decided by the appeal. It does not apply to benefits that are owed for period before the magistrate’s decision. Although the Second Injury Fund may reimburse the employer, SSA offsets the 70 percent level payments to the worker.

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SSA is not bound by the terms of an amended stipulation in determining by what rate is used for the offset. SSA is also not bound by terms of any second or amended LS award. For more information, see DI 52150.065E - Subsequent addenda to LS settlements.

I. Rate to use to compute offset

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Michigan State law provides that the worker’s WC benefit may be reduced when the worker also receives a benefit under a private pension plan, sick and accident benefits or other similar benefits.
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If the worker receives a reduced WC benefit because the worker is also entitled to one of the benefits mentioned above, compute offset by using only the reduced WC benefit.

J. Third Party settlement involving Franges payments

Franges payments are often confused with periodic workers’ compensation payments. These payments are not workers’ compensation payments, nor are they paid in lieu of workers’ compensation. Therefore, they are not subject to the offset provisions of the Social Security Act.

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Contact the worker or the worker’s attorney and request a copy of the settlement.
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Do not accept the attorney’s allegation that court case of Franges v. General Motors is cited.
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If the actual settlement is not available, contact the WC carrier or insurance carrier to obtain the proof.
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Documentation of a telephone call to the carrier is sufficient proof of Franges involvement.
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Read the settlement to determine if the court case of Franges v. General Motors is cited
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Post a Special Message on the MBR citing this procedure and identifying the continuing payments as Franges payments.
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Be sure to develop for reimbursement of workers’ compensation payments made and account for the reimbursement in accordance with established procedure.

K. References

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DI 52101.005 Social Security Amendments with Workers’ Compensation/Public Disability Benefits (WC/PDB) Offset Provisions
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Michigan Workers’ Compensation: http://www.michigan.gov/wca
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Michigan Worker’s Disability Compensation Act of 1969, Act 317 of 1969:

http://www.michigan.gov/documents/wca_2004_act_95444_7.pdf

Social Security

Program Operations Manual System (POMS)

DI 52120.125 Michigan Workers’ Compensation (WC)