In the following example, the commutation order does not provide a specified rate based on the commuted value. Therefore, the proration rate is derived using the remaining time-frame and commutation amount. The commuted WC amount (and offset computation) are spread out over the entire period specified.
The NH receives a letter dated 09/25/2005 and it shows the following:
Date of Maximum Medical Improvement: 04/24/2005
Period of Award: 04/24/2005 to 04/14/2009
Number of Weeks of Compensation: 207.36
Weekly Compensation Rate = $282.28
Effective Date of Pay Rate: 11/01/2003
After cost of living adjustments (COLAs), weekly compensation: $289
First payment and the period covered: $5,614.86 for the period 04/24/2005 through 09/06/2005
Continuing Payment every four weeks: $1,156
The letter also states the NH has the option to an LS of $49,995.67 in payment of compensation representing a commuted value of future payments due for the remainder of the award payable from 10/05/2005 to 04/14/2009. If the NH did not opt for the commuted value, the remaining value of his original WC award is $53,156.18, as follows:
$59,927.04 = $289.00 x 207.36 weeks
- 5,614.86 (paid 04/24/05 through 09/06/2005)
- $1 , 156 (paid 09/07/05 through 10/04/2005)
$53,156.18 (balance to be paid by 04/14/2009)
The difference between the $53,156.18 remaining balance of the original WC settlement amount and the commuted value of $49,995.67 for future payments is $3,160.51.
This commutation award specifies a total commuted amount and the time-frame it represents, but there is no rate specified in the commutation order. Therefore, we must prorate the commuted value ($49,995.67) over the entire period remaining in the award (10/05/05 to 04/14/09) to determine the appropriate periodic rate.
NOTE: The alternative of using the previous weekly periodic rate of $289 against the commuted figure would cause the proration to end approximately 11 weeks earlier than the 04/14/2009 end date specified and, therefore, would not conform to the specified period of the award.
The following calculations are required to determine the weekly rate of the commuted $49,995.67 amount:
Determine the number of days from 10/05/2005 through 04/14/2009 (1288)
Divide the commuted value of $49,995.67 by the number of days remaining in the specified period (compute to 3 decimal places and round to the nearest penny):
$49,995.67 divided by 1288 = $38.817 daily rate
Multiply the resulting figure by 7 to determine the weekly rate: $38.817 X 7 = $271.719 rounded to the nearest penny = $271.72
$271.72 is the weekly rate used to compute offset for $49995.67 over the 10/05/2005-04/14/2009 time-frame specified in the commutation award.