The opinion of the court was delivered by: Judge McGINLEY
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE DORIS A. SMITH-RIBNER, Judge, HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge.
Allegheny Ludlum Corporation (Employer) petitions for review from an order of the Workers' Compensation Appeal Board (Board) that reversed the Workers' Compensation Judge's (WCJ) denial of Edward Bascovsky's (Claimant) petition to review benefit offset.*fn1
On September 17, 2003, Claimant petitioned for review of compensation benefit offset and requested "a review of the benefit offset calculation made by employer due to Employee's [Claimant's] receipt of retirement pension benefits." Petition to Review Compensation Benefit Offset, September 17, 2003, at 1; Reproduced Record (R.R.) at 2a. On September 18, 2003, Employer filed an answer and asserted that "[a]ll allegations contained in claimant's petition are denied at this time as defendant [Employer] is without sufficient information to ascertain same . . . [s]trict proof will be demanded at the time of hearing." Answer to Petition, September 18, 2003, at 1; R.R. at 3a.
Hearings were conducted on October 8, 2003, January 13, 2004, and March 18, 2004. Claimant testified that he began to receive pension benefits on July 1, 2003, in the amount of $1,229.37 and that he also received on the same date a lump-sum net payment in the amount of $7,259.78. Notes of Testimony, October 8, 2003, (N.T. 10/08/03) at 7; R.R. at 9a. Claimant stated that he attended a meeting to discuss the "[m]oney we would receive and what . . . lump-sum payment we got." N.T. 10/08/03 at 8; R.R. at 9a. "Patty Thomas [a company representative] was there . . . [and] [s]he was asked questions about the people that were on Workers' Comp, if it would effect [sic] retirement checks." N.T 10/08/03 at 8-9; R.R. at 9a. Claimant was informed that the lump-sum payment was based on vacation pay. N.T. 10/08/03 at 9; R.R. at 9a. Claimant stated that Employer paid his pension benefits from July 1, 2003, and that Bethlehem Steel would begin to pay his pension benefits in 2008. N.T. 10/08/03 at 15; R.R. at 11a.
For Employer, John L. Scarfutti (Scarfutti), Vice President of Human Resources, testified that he was involved in labor negotiations with Employer and Bethlehem Steel Company and that "[v]ery simply as in any negotiation there would be proposals made by either party and ultimately there would be a resolution of those proposals" and "that would result in a settlement that would determine what the pension multipliers, what the pension percentage with those things would have been during those three negotiations." Notes of Testimony, January 13, 2004, (N.T. 1/13/04) at 9; R.R. at 18a. Employer purchased the Houston plant from Bethlehem Steel Company on November 20th, 1998. N.T 1/13/04 at 11; R.R. at 19a. Prior to Bethlehem Steel's operation of the plant "[t]here were two predecessor companies . . . Lukens Steel . . . and Washington Steel . . . ." N.T. 1/13/04 at 11; R.R. at 19a. As part of the negotiations with Bethlehem Steel, Employer "recognized all past employment, whether it was Washington Steel, Lukens Steel or Bethlehem, as related to pensions when and if a person retired from Allegheny Ludlum [Employer]." N.T. 1/13/04 at 11; R.R. at 19a. Scarfutti stated that if an employee was eligible for an immediate pension from Bethlehem Steel after the transition between the two companies Bethlehem Steel and Employer would each pay a portion of the pension. N.T. 1/13/04 17; R.R. at 20a.
In regards to the special payment paid to Claimant, Scarfutti stated that the calculations were based on Employer's vacation rate. "The vacation rate is . . . the very best-blended average weekly of earning that our labor agreement generates." N.T. 1/13/04 at 23; R.R. at 22a. "What i[t] does is it looks at the prior calendar year and it looks at the total earnings, all classes of earnings. It divides by the number of hours worked . . . [i]t then gives you an average hourly rate of earnings." N.T. 1/13/04 at 23; R.R. at 22a. "If the person did not take any vacation prior to retirement, the special payment would be then either 13 weeks or 14 weeks" and if vacation is exhausted the special payment "would then be equal to either eight or nine weeks of vacation pay." N.T. 1/13/04 at 24-25; R.R. at 22a.
Scarfutti said that Employer "received no money related to pensions from Bethlehem or any of the predecessor companies." N.T. 1/13/04 at 39; R.R. at 26a.
Scarfutti said that Employer's pension fund was under funded until it merged its pension fund with Teledyne Corporation. N.T. 1/13/04 at 41; R.R. at 26a. After the merger, Employer's pension fund was over funded. N.T. 1/13/04 at 41; R.R. at 26a. Finally, Scarfutti stated that "[w]hen Bethlehem went into Chapter 11, PBGC [Pension Benefit Guarantee Corporation] . . . they take the pension trust [and it] guarantees pensions to some extent . . . [i]t's normally on average somewhere around 80 percent of what the company promised . . . [s]o it's a reduced benefit." N.T. 1/13/04 at 43; R.R. at 27a.
Patricia A. Thomas (Thomas), Pension Plan Administrator for Employer, testified that Employer outsourced all pension responsibilities to Mellon HR Solutions. N.T. 1/13/04 at 51; R.R. at 29a. Thomas stated that Employer would add $400.00 to an employee's pension benefit if he or she was not collecting social security. N.T. 1/13/04 at 51; R.R. at 29a. "[T]he $400.00 supplement is paid until age 62[*fn2 ] when one is eligible to collect 80% of their benefits from Social Security." N.T. at 51; R.R. at 29a. Thomas stated that even if the employee elects to retire at the age of sixty-five the $400.00 supplement is still discontinued. N.T. 1/13/04 at 52-53; R.R. at 29a. Thomas concluded:
Let's say the person retires from Allegheny Ludlum [Employer] and he's not eligible to receive his Bethlehem Steel pension until age 65. Allegheny Ludlum [Employer] pays the full benefit for that participant until age 62 or later when he becomes eligible to collect 80 percent of his Social Security. At that time we use his frozen benefit from Bethlehem Steel, $800 and we reduce it by the factor which in this case for the Houston people it was 7.53, the reduction factor. And then that is reduced from their Allegheny Ludlum pension and we would then pay a new amount.
N.T. 1/13/04 at 53; R.R. at 29a.
The WCJ made the following pertinent findings of fact: . . . .
2. On December 19, 2001, Edward Bascovsky [Claimant] sustained an injury while working for employer. The injury was recognized by a notice of compensation payable listing a compensation rate of $485.11 per week based on an average weekly wage of $727.66 and which described the injury as a sprain/strain of the left upper arm and shoulder. . . . .
4. On July 25, 2003, employer issued a corrected notice of workers' compensation benefit offset by which it indicated that it was going to take an offset for pension benefits received by Edward Bascovsky [Claimant]. The notice stated that an offset credit of $283.33 will be deducted from Mr. Bascovsky's [Claimant] weekly benefits beginning on August 13, 2003. The notice further stated that Mr. Bascovsky's [Claimant] benefits will be suspended for 37 weeks or until April 18, 2004, to recover an overpayment. The notice explained that for the months of April through June of 2003 Mr. Bascovsky [Claimant] received a lump sum payment of $7,259.78 which equates to $557.58 per week and that as of July 1, 2003, he received a monthly pension of $1,229.67 which equates to $283.33 per week. (emphasis added). . . . .
6. Although there is only a corrected notice of benefit offset of record for Mr. Bascovsky [Claimant], there was obviously a prior notice of benefit offset issued. Mr. Bascovsky [Claimant] filed a petition for review of benefit offset after both the original and the corrected notices were issued . . . . . . . .
10. During the course of the hearings, counsel for claimants explained that the first issue involved in this case is whether the lump sum received by the claimants at the time they retired should be considered as part of their pension. The second issue raised by counsel is whether employer should be entitled to take an offset for 100% of the pension amount when this is a multi-employer situation and the Bureau's regulations provide that employers are only entitled to take an offset for the proportion which they contributed to the employee's pension. (emphasis added). . . . .
13.a. Mr. Bascovsky [Claimant] was born August 7, 1945.
b. Mr. Bascovsky [Claimant] received an award of pension benefits as of July 1, 2003, and his pension amount per month is $1,229.67. He also received a lump sum payment around the same time of $7,259.78.
c. At some point Mr. Bascovsky [Claimant] attended a meeting called by employer to explain the plant shut down and benefits that employees were supposed to receive. Ms. Thomas explained at the meeting that the lump sum payment was vacation payoff. During a subsequent phone call she explained that Mr. Bascovsky's [Claimant] lump sum payment was payment of nine weeks of vacation pay. Ms. Thomas and another company representative explained at the meeting that if people were on workers' compensation, it would not affect their retirement checks. (emphasis added). . . . .
f. On cross-examination, Mr. Bascovsky acknowledged that his pension is being paid by employer and not any of the prior owners of the plant. (emphasis added). . . . .
14.d. Mr. [John] Scarfutti [Vice-President of Human Resources] . . . further explained that if they [employees] were eligible for an immediate pension from Bethlehem Steel at the time employer purchased the facility [Houston Plant], Bethlehem would pay a portion of the pension and employer would pay a portion of the pension so there would actually be two pension checks received by the employee. Mr. Scarfutti stated that most of the employees were not eligible for an immediate pension from Bethlehem Steel at the time of the purchase. (emphasis added).
e. Mr. Scarfutti explained that the facility was purchased in November of 1998, but because of changes in the market employer shut down the melt shop portion of the facility permanently in December of 2001 . . . . (emphasis added).
f. Mr. Scarfutti testified that at the time an employee retires, he or she receives a lump sum called a special payment which he described as a pension benefit for the first three months after the person retires. He further testified that it is paid out of the pension trust and it is prior to the beginning of the normal monthly annuity payment. Mr. Scarfutti further explained that the pension trust can only be used for pension payments and, if the trust is over-funded, retiree medical payments. He added that the trust cannot be used to make vacation payments. Mr. Scarfutti acknowledged that the calculation of the special payment is based on the vacation rate . . . . (emphasis added).
g. On cross-examination, Mr. Scarfutti stated that the employer's pension trust was over-funded at the time of the purchase of the Houston facility. He further stated that to his knowledge, employer had not made any cash contribution to the pension trust since the date of the purchase of the facility. (emphasis added). . . . .
i. Mr. Scarfutti testified that employer is not using money that accrued from previous employers to pay the claimants' pension benefits. He further explained that in August of 1996 employer merged with Teledyne Corporation which had a pension plan that was significantly over-funded. Mr. Scarfutti explained that the pension plans of the two companies were merged so that the consolidated pension plan was over-funded. He further explained that Bethlehem Steel had its own pension plan which is separate from employer's pension plan. He further explained that employer is picking up the full pension payment for the claimants until they reach the age where they become eligible for a pension from Bethlehem Steel's plan at which point Bethlehem will start paying some portion of the pension.
15.f. On cross-examination, Ms. Thomas acknowledged that she did not have an understanding with respect to the effect the receipt of pension benefits may have on workers' compensation benefits. She again stated that she did not recall anyone asking during the presentation about the effect of pension benefits on workers' compensation benefits . . . . .
19. I accept the testimony of Mr. Scarfutti as credible. His testimony is essentially uncontradicted. There was no evidence offered which would refute his explanation of employer's pension plan. (emphasis added).
20. With respect to Ms. Thomas and both claimants [Bascovsky and Tarr], I also accept the testimony of these witnesses as credible . . . . I also believe that because Ms. Thomas' job involves pension benefits and she made no representation during her testimony that she has any knowledge of workers' compensation law, that she would not have given an ...