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Harrison v. Workers' Compensation Appeal Board (Commonwealth of Pennsylvania)

Commonwealth Court of Pennsylvania

June 28, 2017

David C. Harrison, Petitioner
v.
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

          OPINION

          ROBERT SIMPSON, JUDGE

         This 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.

         I. Background

         In June 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 $845.00.[1]

         A. Notice of Benefit Offset

         In 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.

         Section 204(a) of the Workers' Compensation Act (Act)[2] 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).

         Calculating 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.[3]

         B. Claimant's Petitions

         In 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.

         C. Before the WCJ

         Before the WCJ, Employer presented deposition testimony from three witnesses. In her first three findings of fact, the WCJ reviewed Employer's evidence.

         Sara 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.

         Based 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.

         In 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 105a-06a.

         SERS's 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.

         However, 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.

         In the 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.

         Employer 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 accounts. Id.

         SERS 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 determined. Id.

         Here, 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.

         SERS 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.

         Notably, 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.

         Based 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. Id.

         Therefore, 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. 5d.[4]

         Also, 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).

         The WCJ 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.[5]

         II. Discussion

         A. Argument

         Claimant 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) (emphasis added).

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 benefit." Id.

         In 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 stated:

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.

         Claimant 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' ...


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