On Appeal From the United States District Court for the District of New Jersey, D.C. Civil No. 85-2507.
Becker, Scirica and Rosenn, Circuit Judges
This is an appeal by the Secretary of Health and Human Services ("Secretary") from a district court order reversing a decision by the Social Security Administration ("SSA") to reduce the amount of social security disability benefits payable to the plaintiff, Guiseppe Sciarotta. The district court, applying the literal words of the statutory provision authorizing such reductions, 42 U.S.C.A. § 424a (West 1983 & Supp. 1987), held that where a state imposes a reduction on workers' compensation payments because of the receipt of federal disability benefits, the SSA may not in turn reduce the federal disability benefits because of the receipt of the state worker's compensation payments. We find this literal application inconsistent with Congress' intent to limit an injured workers total benefits (combining state and federal payments) to 80 % of pre-disability earnings. We therefore will reverse the district court's order, and permit the SSA to reduce federal benefits, if necessary to reduce total state and federal benefits to the 80 % level. However, we will remand this case to the district court for a determination of whether the SSA's method of converting plaintiff's lump sum worker's compensation settlement to a stream of periodic payments, based on the assumption that the settlement represented the maximum allowable monthly payment, was rational.
Sciarotta, a 49-year old machine operator, suffered a permanently disabling heart attack at work on July 19, 1979. As a result, the SSA awarded him social security disability benefits, pursuant to 42 U.S.C. § 423 (1982 & Supp. Ill 1985). Sciarotta also filed a claim for New Jersey state workers' compensation benefits, under N.J. Stat. Ann. §§ 34:15-1 to 15-127 (West 1959 & Supp. 1987), which he settled for a lump sum of $40,000 on October 15, 1981.*fn1 This settlement, by its terms, had "the effect of a dismissal with prejudice" of his claim, and constituted a "complete and absolute surrender and release of all [his] rights arising out of this/these [workers' compensation] claim(s)." App. 55. See N.J. Stat. Ann. § 34:15-20 (West Supp. 1987).
After being advised of this settlement, pursuant to its interpretation of 42 U.S.C. § 424a, the SSA reduced Sciarotta's disability payments so that his total benefits (combining state workers' compensation and federal social security) would not exceed 80 % of his pre-disability earnings. Section 424a(a) provides, in relevant part:
If for any month prior to the month in which an individual attains the age of 65 --
(1) such individual is entitled to benefits under section 423 of this title, and
(2) such individual is entitled for such month to --
(A) 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,
his benefits under section 423 of this title for such month . . . shall be reduced (but not below zero) by ...