David C. Harrison, Petitioner
Workers' Compensation Appeal Board (Commonwealth of Pennsylvania), Respondent
Argued: April 5, 2017
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT
SIMPSON, Judge HONORABLE ANNE E. COVEY, Judge HONORABLE
MICHAEL H. WOJCIK, Judge HONORABLE JULIA K. HEARTHWAY, Judge
HONORABLE JOSEPH M. COSGROVE, Judge
appeal involves review of an employer's notice of
workers' compensation benefit offset against an
employee's pension benefits. David C. Harrison (Claimant)
petitions for review of an order of the Workers'
Compensation Appeal Board (Board) affirming an order of
Workers' Compensation Judge Pamela Briston (WCJ) denying
his review offset, reinstatement and penalty petitions. In
denying Claimant's petitions, the WCJ upheld the
Commonwealth's (Employer) notice of weekly offset amount
of $434.34. Claimant contends the WCJ erred in calculating
the offset based on the maximum monthly amount of pension
benefits he could receive where he opted for a lower monthly
rate which provides for a survivor benefit for his spouse in
the event of his death. Upon review, we affirm.
2010, Claimant sustained a work injury. Employer accepted the
injury in a notice of compensation payable (NCP), which
described the injury as a left acetabulum fracture caused by
a slip/fall on a carpet. The NCP indicated an average weekly
wage (AWW) of $1, 273.59 and a weekly compensation rate of
Notice of Benefit Offset
February 2012, Employer issued a notice of workers'
compensation benefit offset advising Claimant that based on
information it received from the Pennsylvania State
Employees' Retirement System (SERS), Employer was
entitled to a pro-rata pension offset for benefits Claimant
received in the amount of $1, 885.03 per month. Reproduced
Record (R.R.) at 1a-3a.
204(a) of the Workers' Compensation Act
(Act) provides in pertinent part (with emphasis
added): "the benefits from a pension plan to the
extent funded by the employer directly liable for the
payment of which are received by an employee shall
also be credited against the amount of the award made under
[the Act]." 77 P.S. §71(a) (emphasis added). In
addition, Workers' Compensation Bureau (Bureau)
regulations governing the application of offset for pension
benefits provide (with emphasis added):
(a) Offsets of amounts received from pension benefits shall
be achieved on a weekly basis. If the employe receives
the pension benefit on a monthly basis, the net amount
contributed by the employer and received by the employe shall
be divided by 4.34. The result is the amount of the
weekly offset to the workers' compensation benefit.
34 Pa. Code §123.9(a).
the offset based on 34 Pa. Code §123.9(a), Employer
determined the weekly offset to be $434.34. Subtracting this
amount from Claimant's weekly compensation rate of
$845.00 reduced Claimant's weekly payment to $410.66.
R.R. at 3a.
February 2014, Claimant filed a review offset petition, a
penalty petition and a reinstatement petition. Claimant
alleged Employer improperly took an offset credit for an
overpayment. R.R. at 9a. Claimant also sought a review of
Employer's calculation of the offset. Id.
Before the WCJ
the WCJ, Employer presented deposition testimony from three
witnesses. In her first three findings of fact, the WCJ
reviewed Employer's evidence.
Westhaver (Claims Representative), a claims representative
for Inservco Insurance Services (Inservco), testified that
Inservco replaced CompServices as Employer's third-party
administrator. When Inservco learns a Commonwealth employee
retired and is receiving pension benefits, Inservco obtains
pension information from SERS, calculates the appropriate
offset and issues the appropriate LIBC (Bureau) forms. WCJ
Op., 2/17/15, Finding of Fact (F.F.) No. 1.
on her review of the file, Claims Representative determined
Claimant returned a Bureau form to Inservco's
predecessor, CompServices, in December 2011 indicating that
he was receiving pension benefits. Claimant provided the
gross and net amount of his pension benefits. On February 22,
2012, CompServices issued the notice of offset to Claimant.
F.F. No. 1.
particular, Claims Representative testified the notice of
offset indicated the Employer-funded amount of Claimant's
monthly pension benefit to be $1, 885.03. F.F. No. 1; Dep. of
Sara Westhaver, 10/2/14 (Westhaver Dep.), at 19-20; R.R. at
3a, 103a-04a. Pursuant to 34 Pa. Code §129.3(a), that
amount is divided by 4.34, yielding a weekly offset of
$434.34. F.F. No. 1; Westhaver Dep., at 19-20; R.R. at
103a-04a. On cross-examination, Claims Representative
acknowledged the only role a third-party administrator plays
in calculating the offset is to divide the monthly offset
amount provided by SERS so that a weekly offset can be
determined. F.F. No. 1; Westhaver Dep., at 20-21; R.R. at
Director of Benefit Administration, Susan Hostetter (SERS
Benefits Director) testified regarding the manner in which
SERS calculates the Employer-funded part of Claimant's
pension. F.F. No. 2. SERS Benefits Director testified that
Claimant had various pension payment options he could select.
Some options provide a greater monthly payout than others.
However, options with a lower monthly payout offer other
benefits such as payments to a spouse should the retiree
predecease the spouse. Id.
with regard to calculating the pension offset in workers'
compensation cases, SERS does not take into consideration
which payment option the participant chooses. Rather, SERS
always calculates the offset based on the participant's
maximum single life annuity (MSLA). This is the maximum
amount an injured employee could elect to receive each month.
F.F. No. 2.
present case, SERS calculated Claimant's MSLA as $3,
742.51 per month. However, Claimant elected a different
payment option which paid him a gross monthly amount of $3,
434.16. After deductions, Claimant received an initial net
monthly payment of $3, 053.01. F.F. No. 2.
also submitted the testimony of Brent A. Mowery (SERS
Actuary), an actuary employed by SERS and affiliated with a
company known as the Hays Group. F.F. No. 3. He explained
that SERS has a defined-benefit plan. In such a plan, all of
the participants' contributions are comingled with
Employer's contributions. Id. The combined
amount is then invested. Employees do not have individual
Actuary explained that in determining the extent to which the
Commonwealth funds an employee's pension, it is necessary
to determine how much money will be needed to fund the
employee's pension for the rest of his life. F.F. No. 3;
Dep. of Brent A. Mowery, 10/15/14 (Mowery Dep.), at 10; R.R.
at 121a. This determination is an "actuarial
calculation." F.F. No. 3; Mowery Dep. at 10; R.R. at
121a. Once that determination is made, it is possible to
calculate the amount the employee contributed over the course
of his life. F.F. No. 3. When the employee's contribution
is deducted from the total amount of funding needed, the
amount the Commonwealth contributed to the pension can be
SERS Actuary testified he determined Claimant's MSLA to
be $3, 742.51 per month. F.F. No. 3; Mowery Dep. at 18; R.R.
at 129a. By using Claimant's MSLA, remaining life
expectancy, and applying an actuarial factor of 8.7045, SERS
Actuary determined $390, 920.14 was needed to fund
Claimant's pension. F.F. No. 3; Mowery Dep. at 18-19;
R.R. at 129a-30a. Subtracting Claimant's contributions
and investment earnings, $194, 021.33, SERS Actuary
calculated that the remaining amount necessary to fund the
pension, $196, 898.81, represents Employer's
contribution. F.F. No. 3.
Actuary observed that the Employer-funded portion of
Claimant's entire pension, $196, 898.81, constitutes
50.368039 percent of the total value of Claimant's
pension. F.F. No. 3. Therefore, the Employer-funded portion
of Claimant's monthly MSLA is calculated as 50.368039
percent of $3, 742.51, which amounts to $1, 885.03. F.F. No.
3; Mowery Dep. at 33-34; R.R. at 144a-45a.
Claimant did not present any testimony, expert or otherwise,
on his own behalf. F.F. No. 4. As such, Claimant failed to
present any expert actuarial testimony to challenge
Employer's actuarial calculations. Id.
on the evidence presented, the WCJ determined Claimant failed
to meet his burden of proof in his review offset,
reinstatement and penalty petitions. F.F. No. 5. In her
decision, the WCJ accepted the testimony of Claims
Representative, SERS Benefits Director and SERS Actuary as
credible and convincing with respect to the calculation of
Employer's offset. F.F. No. 5a. In particular, the WCJ
found their calculations of the pension offset to be sound.
F.F. No. 5b. The WCJ also determined the methodology
described by SERS Actuary accurately calculated the
Employer-funded portion of the SERS defined-benefit plan.
the WCJ found Employer was entitled to a weekly offset of
$434.34 resulting in a weekly compensation benefit of
$410.66. F.F. No. 5c. Pursuant to 34 Pa. Code §123.4(a),
Employer is entitled to this offset for the duration of
Claimant's collection of his pension benefit. F.F. No.
Claimant asserted Employer failed to prove SERS properly
calculated the offset against the net amount of benefits he
received each month as required by the Act and its applicable
regulations. In rejecting this argument, the WCJ noted an
employer's offset calculations determine the funding
needed to be provided by the employer. F.F. No. 6(II)(b).
Although Claimant elected a lesser amount in order to
preserve a survivor benefit for his spouse, the WCJ found
this is still a benefit to Claimant as an employee.
Id. As such, to calculate the offset as Claimant
requested would not take into account either the total amount
required to be funded by Employer in order to pay the
survivor benefit to Claimant's wife. F.F. No. 6(II)(c).
denied Claimant's petitions. On appeal, the Board
affirmed. In its opinion, the Board noted that even though
Claimant took a lower paying option than the MSLA standard
payment, Claimant's decision did not impact the amount of
money required to fund his pension for the remainder of his
life and his wife's life. Bd. Op., 4/7/16, at 6, 7.
Claimant petitions for review.
contends the Board erred in affirming the WCJ's decision
that Employer's offset should be calculated on the gross
amount of the MSLA payment rather than the lesser amount
Claimant actually received. To that end, Claimant asserts
Section 204(a) of the Act provides "the benefits from a
pension plan to the extent funded by the employer directly
liable for the payment of which are received by an
employee shall also be credited against the amount of
the award made under [the Act]." 77 P.S. §71(a)
Similarly, Bureau regulations provide: "Workers'
compensation benefits otherwise payable shall be offset by
the net amount an employe receives in pension
benefits to the extent funded by the employer directly
liable for the payment of workers' compensation." 34
Pa. Code §123.8(a) (emphasis added). "If the
employe receives the pension benefit on a monthly basis,
the net amount contributed by the employer and received
by the employe shall be divided by 4.34." 34 Pa.
Code §123.9(a) (emphasis added). "The result is the
amount of the weekly offset to the workers' compensation
support of his position, Claimant cites City of
Philadelphia Gas Works v. Workers' Compensation Appeal
Board (Amodei), 964 A.2d 963 (Pa. Cmwlth. 2009), where
this Court, in an en banc decision, held that a
pension offset was based on the net amount the claimant
actually received. In reviewing Section 204(a) of the Act, we
The statutory language permitting an employer to offset
workers' compensation paid to an employee by the amount
of pension benefits the employee 'received' does not
specify whether the credits allowed are to be calculated on
the gross or net amount received by the employee. However,
pursuant to legislative directive, this information is
supplied by regulation.
Philadelphia Gas Works, 964 A.2d at 965. We then
noted the language in 34 Pa. Code §123.8(a) that
workers' compensation benefits otherwise payable shall be
offset by the net amount an employe receives in
pension benefits to the extent funded by the employer
directly liable for the payment of workers' compensation.
also cites our decision in City of Philadelphia v.
Workers' Compensation Appeal Board (Harvey), 994
A.2d 1 (Pa. Cmwlth. 2010), where a City of Philadelphia
(City) employee sustained a work injury and began receiving
workers' compensation benefits at the rate of $527.00 per
week. Thereafter, the employee began receiving a disability
pension from the City. Had he not been receiving workers'