Herman T~ received periodic workers compensation payments for a permanent partial
disability in Minnesota, and later he settled his claim based on an agreement that
he had a permanent total disability. You asked whether the agreement that Mr. T~ was
permanently and totally disabled served to recharacterize his permanent partial payments
as total payments. For the reasons we state below, we believe that SSA is not required
to recharacterize the permanent partial payments.
Mr. T~, who was born on June 30, 1943, sustained an on-the-job injury in March 1988
when he was 44 years old. He received $38, 906.77 worker's compensation benefits for
temporary total disability from March 1988 through December 1, 1990. In addition,
beginning in February 1991, Mr. T~ also received economic recovery compensation, a
special type of permanent partial workers compensation, at the rate of $360.29, representing
a 12% permanent partial disability.
In March 1991, Mr. T~ applied for DIB. In May 1992, an ALJ found that Mr. T~ was entitled
to disability benefits with an onset date of June 15, 1990. In July 1992, the agency
notified Mr. T~ that his social security benefits would be reduced due to his workers'
In September 1992, Mr. T~ entered a settlement agreement with his employer and his
employer's insurance company (the original stipulation) in which the parties agreed
that Mr. T~ had been paid $38,906.77 in temporary total disability benefits by December
1, 1990; that in addition, he had been paid economic recovery compensation benefits
for 72 weeks at the rate of $360.29 per week, totaling $25,940.88 for the period from
February 1991 through June 22, 1992. Original Stipulation at 2. Notwithstanding their
different claims, the parties agreed that Mr. T~ had been permanently totally disabled
since March 1988, that all weekly benefits paid to him for "temporary total disability
through December 1, 1990 to the present and continuing" should be deemed to be permanent
and total disability benefits; that the employer/insurer had paid the threshold amount
of $25,000 in weekly benefits by December 1, 1990; and that the employer was entitled
to reverse offset (pursuant to M.S.A. § 176.101, Subd. 4).
In November 1994, the agency notified Mr. T~ that, based on the September 1992 stipulation,
the employer had paid a total of $25,000 in permanent total benefits as of December
1, 1990, and (as those benefits were now subject to Minnesota's "reverse offset"),
his social security benefits were no longer affected by his permanent total workers
compensation benefits. His permanent partial payments for economic recovery compensation,
which began in February 1991 and ended in June 1992, however, were subject to a separate
social security offset, and the agency accordingly reduced his social security benefits
during that period ending in June 1992, resulting in an overpayment of $4,623.
In December 1994, Mr. T~'s attorney requested reconsideration of this determination
that he had been overpaid, claiming that while Mr. T~'s permanent partial disability
benefits were initially paid as economic recovery compensation prior to the determination
that he was permanently and totally disabled, thereafter, his economic recovery compensation
benefits were credited against his permanent total disability benefits and he was
paid instead permanent partial benefits in the form of impairment compensation.
In February 1996, Mr. T~'s attorney renewed his argument that Mr. T~'s previously
received payment of 12% permanent partial disability was automatically recalculated
and paid as impairment compensation under Minnesota statute when an employee is found
to be permanently and totally disabled, citing Minn. Stat. § 176.101(3)(o), and that
consequently no permanent partial benefits were made to Mr. T~ after December 1, 1990
when the agency removed its workers' compensation offset with respect to his permanent
total disability benefits.
In July 1996, the agency notified Mr. T~ that it had reconsidered its determination
but because they had not received any new information, it was not taking action on
his request. The agency indicated that it had been informed that counsel was going
to obtain a clarification of the stipulation and that once the approved clarification
was received, they would take any necessary action. Mr. T~ was also advised of his
right to request a hearing within 60 days from the date he received this notice.
In September 30, 1996, Mr. T~ obtained a "Supplemental Stipulation," the purpose of
which was "to clarify the employer's and insurer's obligation to pay impairment compensation
for a 12% whole body permanent partial disability pursuant to Minn. Stat. § 176.101,
Subd. 3(o)." Article V, Supplemental Stipulation. Specifically, the supplemental stipulation
provides that the prior economic recovery compensation payments were to be "retroactively
reclassified as permanent total disability benefits," thus subject to Minnesota's
reverse offset, and indicating that this was a "statutorily authorized reclassification
of benefits." Article VIII, Supplemental Stipulation.
In December 1996, Mr. T~'s attorney contended that Paragraph VIII, Paragraphs 2 and
3 of the supplemental stipulation clarified that Mr. T~ received no permanent partial
disability of any type after December 1, 1990 (even though he had previously asserted
that his economic recovery compensation had been recalculated as impairment compensation
and that the purpose of the amended stipulation was to clarify the employer's obligation
to pay impairment compensation), and that therefore the agency should not have reduced
his social security benefits after that date.
The Social Security Act places a ceiling on an individual's combined social security
benefits and state workers' compensation benefits. See 42 U.S.C. § 424a. Where an individual is receiving both social security disability
insurance benefits and state workers' compensation benefits, his or her social security
benefits shall be reduced by the amount necessary to ensure that the sum of the state
and federal benefits does not exceed 80 per cent of the individual's average pre-disability
earnings. 42 U.S.C. 424a(a). The offset reflects Congress' concern that recovery of
overlapping workers' compensation and social security disability benefits decreases
an injured worker's incentive to seek rehabilitation, reduces the duplication inherent
in the programs, and at the same time allows a supplement to workmen's compensation
where the state payments are inadequate. Richardson v. Belcher, 404 U.S. 78, 82-83 (1971). Worker's compensation benefits subject to this offset
are "periodic benefits [paid] on account of his or her total or partial disability
(whether or not permanent) under a worker's compensation law." 42 U.S.C. § 424a(a)(2)(A).
In Minnesota, after permanent total disability benefits of $25,000 have been paid,
workers' compensation will reduce the permanent total disability benefits it pays
in order to reflect the disability insurance benefits that an individual is receiving
from the Social Security Administration. Minn. Stat. Ann. § 176.101, Subd. 4 ("reverse
offset"). In order to prevent an individual from being subjected to offset by both
the state and federal agencies, the Social Security Act provides that SSA stops its
own offset if the state is executing a "reverse offset." See 42 U.S.C. § 424a(d). In Minnesota, the reverse offset applies only when the workers'
compensation benefits exceed $25,000 and only in cases of permanent total disability.
Minn. Stat.Ann. § 176.101, Subd. 4; see also McClish v. Pan-O-Gold Baking Company, 336 N.W.2d 538, 543 (Minn. 1983) (holding that the reverse offset does not apply
to temporary total disability benefits, or to any other benefits except permanent
total disability benefits).
Permanent partial awards, then, are not subject to "reverse offset" under Minnesota
law, and SSA offsets such compensation payments for permanent partial disabilities
no matter the amount. See POMS DI 52120.130; see also Herrley v. Chater, 108 F.3d 1381 (8th Cir. 1997) (Table), 1997 WL 90316 (8th Cir. (Minn.)) (upholding
agency's determination that a lump sum payment for permanent partial disability was
not subject to "reverse offset" under Minnesota law (because the compensation was
for a permanent partial, not total, disability ) and finding that it was a periodic
payment subject to social security offset, even though Minnesota distinguishes disability
benefits which are paid to compensate for a functional loss of body from lost income
benefits); accord Olson v. Apfel, 170 F.3d 820, 825 (8th Cir. 1999) (holding that payment for permanent partial disability
was periodic payment subject to federal offset, even though North Dakota distinguishes
disability benefits, which are paid on account of reduced earning capacity or wage
loss, from impairment awards, which are paid on account of loss of bodily function).
Here, the original stipulation reclassified the $38,906.77 compensation paid as temporary
total disability through December 1, 1990, as compensation for permanent total disability.
The employer accordingly reduced the weekly permanent total disability compensation
due by the amount of the social security benefits. Beginning December 1990, the employer
paid Mr. T~ $168.33 per week for his permanent total disability. Original Stipulation,
Articles VII, VIII. The agency accordingly removed its offset of Mr. T~'s permanent
total disability benefits.
The agency, however, continued to offset the permanent partial economic recovery compensation
award of $25,940.88 that Mr. T~ had received from 2/91 until 9/92 as permanent partial
compensation for the 12% loss of body function. Thereafter, Mr. T~'s counsel submitted
an amended stipulation by which he attempts to recharacterize the permanent partial
economic recovery compensation award as an award for permanent total disability, claiming
that the reclassification was "statutorily authorized" under subd. 3o of M.S.A. §
We do not believe that the statute directly answers this question one way or the other.
Nonetheless, we think the better answer is that the economic recovery compensation
for a permanent partial impairment is not reclassified as compensation for permanent
total disability. Subd. 3o provides in pertinent part as follows:
Subd. 3o: Inability to return to work. (a) An employee who is permanently totally
disabled pursuant to subdivision 5 shall receive impairment compensation as determined
pursuant to subdivision 3b. This compensation is payable in addition to permanent
total compensation pursuant to subdivision 4 and is payable concurrently. In this
case the impairment compensation shall be paid in the same intervals and amount as
the permanent total compensation was initially paid, and the impairment compensation
shall cease when the amount due under subdivision 3b is reached. . . .
(b) If an employee is receiving periodic economic recovery compensation and is determined
to be permanently totally disabled no offset shall be taken against future permanent
total compensation for the compensation paid and no permanent total weekly compensation
is payable for any period during which economic recovery compensation has already
been paid. No further economic recovery compensation is payable even if the amount
due the employee pursuant to subdivision 3a has not yet been reached.
(c) An employee who has received periodic economic recovery compensation and who meets
the criteria under clause (b) shall receive impairment compensation pursuant to clause
(a) even if the employee has previously received economic recovery compensation for
M.S.A. § 176.101, subd. 3o.
Clause (b) provides that if an employee is receiving economic recovery compensation
and is determined to be permanently totally disabled, the employer cannot take any
offset against the future permanent total compensation due the employee for the economic
recovery compensation he already paid the employee, the employer cannot pay any permanent
total weekly compensation for any period during which the economic recovery compensation
was already paid, and the employer cannot pay any more economic recovery compensation
even if the amount due the employee, under subd. 3a, has not yet been reached. (Here,
however, the employer paid Mr. T~ $25,940, the full amount of economic recovery compensation
due him under subd. 3a). Clause (b) seems to provide that an employee cannot receive
concurrent payments for both economic recovery compensation and permanent total disability.
But, the statute provides that if an employee has received economic recovery compensation
and is later determined to be permanently totally disabled, under clause (c), the
employer must pay the employee the amount of impairment compensation due him under
subd. 3a, even if he has received economic recovery compensation for that disability.
Thus, under subd. 3o, Mr. T~'s employer would seem to owe him an additional $9,000
in impairment compensation without a credit for the economic recovery compensation
already paid, but does not owe him any compensation for his reduced earning capacity
due to his permanent total disability during the period Mr. T~ received economic recovery
compensation. M.S.A. §§ 176.021, subd.3, 176.101, subd.3o.
Here, the parties asserted that the amended stipulation is intended to clarify the
employer's obligation to pay impairment compensation of $9,000 for a 12% whole body
permanent partial disability, Amended Stipulation, Article V, once it was determined
that Mr. T~ had been disabled since March 15, 1988. Amended Stipulation at VIII, par.
1-par.2, citing Minn. Stat. § 176.101, Subd. 3(o). It does not appear, however, that
the employer paid the additional impairment compensation award of $9,000. Rather,
the amended stipulation stated that the previously paid $25,940.88 permanent partial
economic recovery compensation was "retroactively recharacterized" as permanent total
disability benefits reduced by the reverse offset, effective December 1, 1990 when
Mr. T~ began receiving social security DIB, id., and that it was also used as credit for the $9,000 impairment compensation award:
any overpayment occasioned by the difference between economic recovery compensation
benefits previously paid and reduced permanent total benefits due since December 1,
1990 was balanced against the employee's claim for the 12% impairment compensation.
The Minnesota's Worker's Compensation statute does not appear to directly answer the
question as to whether the economic recovery compensation can be recharacterized as
permanent total, and we have not found any cases that directly answer this question.
We have communicated with the Minn. Department of Labor and while they do not have
an authoritative answer, they told us that it could be consistent with the purposes
of the statute to interpret the amended settlement as recharacterizing the economic
recovery compensation as permanent total disability. They point out that if clause
(b) and (c) are taken literally, the employer would have to pay a double payment of
permanent partial disability for the employee's loss of function, one payment for
economic recovery compensation and another for impairment compensation, but that the
employer would not have to pay any compensation for the employee's wage loss benefits
during the period the employee received economic recovery compensation, even though
the employee has now been determined to be permanently and totally disabled during
the period he received economic recovery compensation. According to this possible
interpretation, subd. 3o declares the permanent total disability that should have
been paid during the period and the economic recovery compensation that was paid as
a "wash," or even perhaps that the economic recovery compensation was "reclassified"
as permanent total disability payments for wage loss, not permanent partial payments
for loss of function. They reason that then it would be reasonable for the employer
to pay impairment compensation but not to owe any permanent total disability payments
for the period the employee received the economic recovery compensation. This interpretation
appears to assume that if an employee has received economic recovery compensation
and is later determined to be totally disabled, he should have received permanent
total disability payments instead of economic recovery compensation. Under this interpretation,
the employee receives one payment of permanent partial disability, the impairment
compensation, but does not receive the economic recovery compensation because it has
been reclassified as permanent total disability.
We believe, however, that in the absence of controlling authority saying that economic
recovery compensation is reclassified as permanent total, the more prudent response
is not to assume that the economic recovery compensation was reclassified as permanent
total disability compensation. Rather, we believe that it is more reasonable to interpret
the statute as meaning exactly what it says, that the employer pays compensation for
a permanent partial impairment of loss of whole body function in the form of economic
recovery compensation until the employee is determined to be permanently totally disabled.
Once it is determined that the employee is permanently disabled, he can no longer
receive economic recovery compensation and he cannot receive any permanent total disability
payments for the period he was receiving economic recovery compensation. Instead,
the employer must compensate the employee for his permanent partial loss of body function
in the form of impairment compensation, even if, as here, the employee has received
his full economic recovery compensation award, and he must also pay permanent total
disability compensation for loss of wages, in addition to and concurrently with his
permanent partial impairment compensation payments. M.S.A. § 172.101, Subd. 3o(b).
Once it is determined that an employee's injury has resulted in permanent total disability,
the statute discusses how to compute the permanent total benefits for lost wages as
well as the permanent partial compensation for the loss of body function for the retroactive
period and does not require reclassification of the economic recovery compensation
as permanent total disability.
Our interpretation that the statute does not require reclassification of permanent
partial economic recovery compensation as permanent total disability compensation
is consistent with other provisions of the statute providing that compensation for
permanent partial disability is payable for functional loss of use or impairment of
function, that permanent partial payments for loss of function are separate, distinct
and in addition to permanent total payments for compensation for wage loss, and that
the employer cannot take credit for any economic recovery compensation payments against
future payments of permanent total disability. M.S.A. § 176.021, subd.3, provides
in part: Subd.3. Compensation, commencement of payment. All employers shall commence
payment of compensation at the time and in the manner prescribed by this chapter without
the necessity of any agreement or any order of the division. . . If doubt exists as
to the eventual permanent partial disability, payment for economic recovery compensation
or impairment compensation, whichever is due, pursuant to section 176.101, shall be
then made when due for the minimum permanent partial disability ascertainable, and
further payment shall be made upon any later ascertainment of greater permanent partial
disability. Prior to or at the time of commencement of the payment of economic recovery
compensation or lump sum or periodic payment of impairment compensation, the employee
and employer shall be furnished with a copy of the medical report upon which the payment
is based and all other medical reports which the insurer has that indicate a permanent
partial disability rating, together with a statement by the insurer s to whether the
tendered payment is for minimum permanent partial disability or final and eventual
disability. . . . Economic recovery compensation or impairment compensation pursuant
to section 176.101 is payable in addition to but not concurrently with compensation
for temporary total disability but is payable pursuant to section 176.101. Impairment
compensation is payable concurrently and in addition to compensation for permanent
total disability pursuant to section 176.101. Economic recovery compensation or impairment
compensation pursuant to section 176.101 shall be withheld pending completion of payment
for temporary total disability, and no credit shall be taken for payment of economic
recovery compensation or impairment compensation against liability for temporary total
or future permanent total disability. Liability on the part of an employer or the
insurer for disability of a temporary total, temporary partial, and permanent total
nature shall be considered as a continuing product and part of the employee's inability
to earn or reduction in earning capacity due to injury or occupation disease and compensation
is payable accordingly, subject to section 176.101. Economic recovery compensation
or impairment compensation is payable for functional loss of use or impairment of
function, permanent in nature, and payment therefore shall be separate, distinct,
and in addition to payment for any other compensation, subject to section 176.101.
. . .
M.S.A. § 176.021, Subd.3 (emphasis added).
This section distinguishes compensation for permanent partial disability in the form
of either economic recovery compensation or impairment compensation from other compensation
in the form of temporary and permanent total disability. The former compensates an
employee when his injury results in loss of function and the latter compensates the
employee when that same, or other, injury results in loss of ability to earn wages.
In construing provisions of the Workers' Compensation Act, each is viewed as supplementary
to the others. Nordman v. Goldfines, 270 N.W. 2d 766, 767-68 (Minn. 1978). If these principles are applied, the most
reasonable interpretation of section 176.101, subd. 3o, which will give effect to
section 176.021, is that the legislature intended that compensation for permanent
partial disability, whether in the form of economic recovery compensation or impairment
compensation, is payable for permanent functional loss of use or impairment of function
and that payments for it are separate, distinct, and in addition to compensation for
permanent total disability which is payable for loss of earning capacity. Under the
statute, then, although the same injury could result in both permanent partial and
permanent total disabilities, they are completely separate and distinct types of losses,
and payments for them are not interchangeable but must remain separate, distinct,
and in addition to each other. It therefore appears that, in keeping with these provisions,
it is more reasonable to assume that the legislature did not intend that economic
recovery compensation payments for functional loss could be reclassified as permanent
total payments for loss of earning capacity.
Here, SSA did not dispute Mr. T~'s reclassification of his temporary total disability
benefits to permanent total disability benefits per the original agreement (Article
VIII), which subjected those benefits to Minnesota's reverse offset, thereby removing
social security's offset as of December 1990 when $25,000 of permanent total had been
paid. Although it may be a close question, in the absence of controlling authority
saying that payments for economic recovery compensation can be reclassified as payments
for permanent total disability, we believe that it cannot be reclassified. Therefore,
the $25,940 in permanent partial economic recovery compensation payments made by Mr.
T~'s employer between February 1991 and June 1992 for a 12% whole body loss cannot
be reclassified as permanent total disability payments for loss of earning capacity,
and are not subject to reverse offset. Consequently, the agency can offset the permanent
partial economic recovery compensation payments. See also Herrley v. Chater, 108 F.3d 1381 (8th Cir. 1997) (Table), 1997 WL 90316 (8th Cir. (Minn.)) (upholding
agency's determination that while a lump sum payment for permanent total disability
was subject to a "reverse offset", a lump sum payment for permanent partial disability
was not subject to a "reverse offset" under Minnesota law and therefore was subject
to social security offset under 42 U.S.C. 424a).
Based on section 224 of the Act, M.S.A. §§0 176.101, 176.021, and SSA policy we believe
that Mr. T~'s employer could not reclassify his prior economic recovery compensation
award as payments for permanent total disability compensation and that, as Minnesota's
reverse offset does not apply to Mr. T~'s prior economic recovery compensation payments,
the agency correctly offset Mr. T~'s benefits. section 224a Therefore, we believe
the agency can properly find that Mr. T~ had been overpaid for the period between
February 1991 through June 22, 1992 when he received both economic recovery compensation
benefits and social security benefits.