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United Airlines v. Workers' Compensation Appeal Board (Gane

April 23, 2012


The opinion of the court was delivered by: Dan Pellegrini, President Judge

Submitted: March 30, 2012



United Airlines (United) petitions for review of an order of the Workers' Compensation Appeal Board (Board) affirming the decision of the Workers' Compensation Judge (WCJ) granting Daniel Gane's (Claimant) petition to review compensation benefit offset (review petition). For the reasons that follow, we affirm the Board.

On February 5, 1997, Claimant injured his left shoulder while working for United. United issued a notice of compensation payable describing the injury as a left shoulder strain*fn1 and providing for workers' compensation benefits of $542 based on Claimant's average weekly wage of $718.01. When Claimant retired on June 3, 2003, he began receiving pension benefits under United's defined-benefit, non-contributory pension plan. United filed a notice of workers' compensation benefit offset (offset notice) indicating that Claimant's workers' compensation benefits would be completely offset by his receipt of pension benefits because it fully funded the pension.

In May 2005, because of United's Chapter 11 bankruptcy reorganization, the United States Federal Pension Benefit Guarantee Corporation (PBGC)*fn2 terminated United's pension plan and became trustee of the plan. Because the pension plan was underfunded, PBGC reduced Claimant's pension benefits from $2,418.75 to $1,934.89. Claimant then filed a review petition claiming United had been underpaying his workers' compensation benefits since November 2005 because it was offsetting a greater percentage of the funds than it was entitled to offset.*fn3

In support of his review petition, Claimant submitted the testimony of Stephen H. Rosen (Rosen), an actuary and certified pension consultant. Rosen testified that when United declared bankruptcy, PBGC took over United's pension plan. He explained that PBGC is funded with premiums paid by all pension plans and assets that it acquires when it takes over underfunded pension plans, and that all transferred assets acquired by PBGC are managed on a pooled basis relative to the liabilities that it accepted. Rosen opined that at the time of the bankruptcy, United's pension plan was only 32% funded based on accrued liabilities, or approximately $2.8 billion underfunded. Because United only funded 32% of Claimant's pension, rather than the 100% it funded before it went into Chapter 11, Rosen opined that with the new offset calculated on United's 32% funding of Claimant's pension, Claimant was entitled to receive workers' compensation benefits in the amount of $542 per week.

In opposition to Claimant's review petition, United presented the testimony of Deborah Reskey (Reskey), its manager for benefit compliance. Reskey testified that prior to the transfer of the plan to PBGC, Claimant had been receiving a gross monthly benefit of $2,418.75. Of that amount, $406.32 was paid by Metropolitan Life (MetLife) through a purchased annuity and $2,012.43 was paid by United through Northern Trust Bank. (Apparently United was making up the difference out of its current earnings.) She testified that all the assets of the United pension fund were transferred to PGBC, which then assumed liability for the pension to be paid. She testified that additional money for the United pensions, as well as other pensions it assumed because of bankruptcy, were funded by a charge placed on other non-bankrupt pension funds that PBGC insured.

Leo Turcotte, Ph.D. (Dr. Turcotte), a Senior Economist for the Center for Forensic Economic Studies, testified that United's plan was a defined-benefit plan which, prior to its termination, was funded entirely by United without any contributions from employees. He testified that he assumed that if United's pension fund was insufficient to pay the pensions for that year, United would pay yearly an amount sufficient to cover pensions for that year. He confirmed the amounts stated by Reskey and further testified that pursuant to the settlement agreement between United and PBGC, PBGC reduced United's portion of the pension benefits to $1,528.57 per month, thereby reducing Claimant's total pension benefits to $1,934.89 per month. He also testified that once PBGC took over the pension plan, it assumed all of United's pension liabilities, leaving United with no further obligation to the pensioners or to PBGC.

The WCJ found that the credible testimony of the witnesses established that prior to May 11, 2005, that the pension plan was funded entirely by United without any contributions from Claimant; that from June 3, 2003 to May 11, 2005, United was entitled to a 100% offset against Claimant's workers' compensation benefits; and that PBGC terminated United's pension plan on May 11, 2005. With regard to Rosen's testimony regarding an alternative benefit offset calculation, the WCJ stated:

This Judge has carefully reviewed the testimony of Stephen Rosen and finds that it is credible or persuasive but not on the issue of supporting a specific alternative benefit offset calculation to be taken by United against Claimant's workers' compensation benefits. Although Mr. Rosen is an actuary, he admits in his testimony that he did not do specific calculations to arrive at his posited offset figure but rather took the figure used in the documents that he reviewed. In that regard his testimony is speculative as to the calculation of the offset. He also admits that it is difficult to come to an actual value of the contribution that United made to have PBGC assume its pension's assets and liabilities because the market value of the transfers would be hard to calculate. In this regard his testimony is speculative as to the calculation of the offset.

(January 28, 2009 WCJ Decision, Finding of Fact No. 10). With regard to United's expert testimony on how the offset should be calculated, the WCJ stated:

This Judge finds further that their testimony is not persuasive on what, if any, benefit calculation should be used to offset Claimant's workers' compensation benefits.

(Id., Finding of Fact No. 14). The WCJ further found that after May 11, 2005, "United did not prove its contribution, either per employee or by actuarial testimony." (Id., Finding of Fact No. 17). However, the WCJ went further and found ...

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