PR 02505.046 South Dakota

A. PR 00-099 Offset of South Dakota Lump Sum Workers' Compensation Award (Ref. No. TAEG3)

DATE: May 14, 1999

1. SYLLABUS

The claimant settled her workers' compensation (WC) claim with a lump-sum settlement. The settlement stated that the net amount was deemed to begin at age 65, thereby circumventing WC offset. The opinion states that the claimant has already received the award and became legally entitled to WC long before age 65. Therefore, the lump-sum settlement can be prorated and offset applied, (if applicable), per normal proration rules.

2. OPINION

This responds to your request for an opinion as to whether the Workers' Compensation (WC) offset provisions of the Social Security Act (the Act) may be applied where the terms of the settlement specify that a lump sum payment is "deemed to be" benefits beginning when the claimant attains age 65 on January 25, 2003. For the reasons discussed below, we believe the offset should be applied.*

More specifically, the facts of this situation, as stated in your memorandum, are as follows. The claimant settled her WC claim and was given a lump sum award, which has already been paid to her. The settlement agreement stated that the net amount (which you did not specify) would be paid "to the client (which is deemed to be benefits from January 25, 2003 through her life expectancy [of] 17.077 years or 204.492 months at $164.53[] per month.)." January 25, 2003, apparently is the date the claimant attains age 65. You are concerned that this "future" language is an attempt to circumvent the provision of the Act that precludes application of the offset if the claimant has attained age 65 at the time of entitlement. While this may be the intent of the language in the settlement agreement, in fact the language does not have the intended effect.

As pertinent here, the Act provides that, "[i]f for any month prior to the month in which an individual attains the age of 65[,] such individual is entitled to [disability] benefits . . ., and [] such individual is entitled for such month to [] periodic benefits on account of his or her total or partial disability (whether or not permanent) under a workmen's compensation law or plan of the United States or a State, . . . the total of his [disability] benefits . . . for such month" must be reduced through the application of an appropriate formula. Section 224(a) of the Act, 42 U.S.C. § 424a(a) (emphasis added); see also 20 C.F.R. § 404.408(a)(2). The United States Court of Appeals for the Eighth Circuit, which includes the District of South Dakota, has recently held that "periodic benefits include unrestricted lump sum payments that are available to replace the injured worker's wages." Olson v. Apfel, 170 F.3d 820, 825 (8th Cir. 1999).

For purposes of the situation you have described, the most important word in the language of the WC offset provision quoted above is "entitled." "Both in legal and general usage, the normal meaning of entitlement includes a right or benefit for which a person qualifies, and it does not depend upon whether the right has been acknowledged or adjudicated. It means only that the person satisfies the prerequisites attached to the right." Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 477 (1992). Such a right "may not be abridged without due process." BLACK'S LAW DICTIONARY 477 (5th ed. 1979).

The claimant in this case became "entitled" to the lump sum payment, i.e., had a right to that payment, when the award was made or approved, because under South Dakota law, "workers' compensation awards whether by agreement or adjudication are final" except in very limited circumstances. Sopko v. C & R Transfer Co., Inc., 575 N.W.2d 225, 228 (S.D. 1998); see also Larsen v. Sioux Falls Sch. Dist., 509 N.W.2d 703, 708 (S.D. 1993). More importantly, the claimant has already received the award, making the entitlement complete. Thus, she became legally entitled to periodic WC benefits (albeit in the form of a lump sum payment) long before she reached age 65. See Estate of C~, 505 U.S. at 477.

We realize the POMS indicate that in determining the lump sum "start date," the first priority is to "allocate to the period specified in the award." POMS DI 52150.060. In the present case, however, using the date in the award document (January 25, 2003) to determine the start date would result in no offset. This would contravene the purpose of the offset provision, which was to prevent duplication of disability benefit payments which would result in payments in excess of perdurability earnings, thus "reduc[ing] the incentive of the worker to return to the job, and imped[ing] the rehabilitative efforts of the state programs." Richardson v. Belcher, 404 U.S. 78, 82-83 (1971). Therefore, we recommend you use as the start date the date the payment was made, or, "if periodic payments