The Social Security Disability Offset: A Comprehensive Review of Statutory and Case Law Guiding Reduction in Florida Workers’ Compensation Benefits
Workers’ compensation cases often overlap with social security disability (SSD) cases. It is not uncommon to find an older worker, with a limited education and unskilled work experience, who has suffered a severe work injury which prevents him or her from returning to a past relevant work or other substantial gainful employment, who may be receiving state workers’ compensation benefits and federal SSD benefits at the same time. In situations where both workers’ compensation benefits and SSD benefits are involved, the practitioner handling either one or both matters needs a working understanding of how each of these systems affect the other. This requires a functional knowledge of both federal social security regulations and state workers’ compensation law, specifically as it pertains to any offsetting or reduction of either benefit. This article will provide the workers’ compensation/social security practitioner with a practical approach to the workers’ compensation/social security disability offset from the Florida perspective.
Federal Statutory Authority
If for any month prior to the month in which an individual attains the age of 65, such individual is entitled to SSD benefits, and such individual is entitled for such month to periodic benefits on account of his or her total or partial disability (whether or not permanent) under a workers’ compensation law or plan of the U.S. or a state, then the total of his or her benefits for such month shall be reduced (but not below zero) by the amount by the sum which exceeds the higher of 80 percent of his or her average current earnings, or the total of such individual’s disability insurance benefits for such month.1
The reduction of benefits required shall not be made if the law or plan under which a periodic workers’ compensation benefit is payable provides for the reduction thereof when anyone is entitled to SSD benefits on the basis of the wages and self-employment income of an individual as of February 18, 1981.2 The reduction of a benefit otherwise required is not made if the workers’ compensation law or plan under which the periodic benefit is payable provides for the reduction of such periodic benefit when anyone is entitled to disability insurance benefits.3
Florida Statutory Authority
Weekly workers’ compensation benefits payable for disability resulting from injuries to an employee who becomes eligible for SSD benefits shall be reduced to an amount whereby the sum of such compensation benefits and such total benefits otherwise payable for such period to the employee and his or her dependents, had such employee not been entitled to workers’ compensation benefits, does not exceed 80 percent of the employee’s average weekly wage. However, this provision shall not operate to reduce an injured worker’s benefits to a greater extent than such benefits would have otherwise been reduced under 42 USC §424(a). This reduction of compensation benefits is not applicable to any compensation benefits payable for any week subsequent to the week in which the injured worker reaches the age of 62 years.
If the provisions of 42 USC §424(a) are amended to provide for a reduction or increase of the percentage of average current earnings that the sum of workers’ compensation benefits and SSD benefits can equal, the amount of the reduction of benefits shall be reduced or increased accordingly. No workers’ compensation benefits payable for any week shall be reduced until the Social Security Administration (SSA) determines the amount otherwise payable to the employee and the employee has begun receiving such social security benefit payments.4
State Case Law
The offset provisions of §440.15(9) (now §440.15(10)) are self-executing in nature.5 The offset may be taken administratively by the employer/carrier once it is determined that the claimant is receiving social security benefits.6 This is determined by submitting a signed DWC-14 form to a local SSA office. The completed DWC-14 will be returned by the same office noting the type and amount of benefits being received.7
Ultimately, the employer/carrier has the burden of proving that it is entitled to the offset against social security benefits.8 The offset will not be permitted in the absence of evidence that it is warranted.9 The employer/ carrier has the continuing right and responsibility to compute and correct the social security offset.10 An employer/carrier can take an offset when the employee is receiving temporary total disability (TTD), temporary partial disability (TPD,) or permanent total disability (PTD) benefits.11In University Medical Center v. Sumpter, 591 So. 2d 288 (Fla. 1st DCA 1991), the court stated that when F.S. §440.15(3)(b)(1) was amended, changing wage loss benefits from monthly to weekly, the employer/carrier’s right to a social security offset against wage loss benefits paid to an injured employee was created for the first time.
For many years, the court indicated that the offset could not be taken retroactively; ruling that it could only be taken prospectively once the employer/carrier determined that the claimant was receiving social security benefits.12 However, in Brown v. L.P. Sanitation, 689 So. 2d 332 (Fla. 1st DCA 1997), the court ruled that the carrier may recoup benefits overpaid pursuant to a statutory provision effective January 1, 1994. Thus, for any benefit paid after January 1, 1994, the recoupment of any overpaid benefits can extend retroactively to January 1, 1994, even if the accident occurred prior to that time. The carrier may recoup up to 20 percent of the claimant’s biweekly benefits pursuant to F.S. §440.15(13).
It should be noted, however, that when the claimant promptly complies with employer/carrier’s request for information on his or her receipt of SSD benefits and employer/carrier waits to file a response or assert an offset, the employer/carrier is not entitled to offset benefits retroactively, but only as of date the response is filed or the offset is actually asserted.13 When the offset pertains to Grice benefits, or collateral sources, as in Orange County Fire Rescue v. Antonelli, 794 So. 2d 758 (Fla. 1st DCA 2001), the employer/carrier is entitled to take a Grice offset retroactively from May 1, 1997, the date Grice was handed down by the Florida Supreme Court.
The offset was mature at three prior merits hearing but never litigated. The Antonelli court concluded that the issue of the offset may not be raised at a subsequent merits hearing because of the doctrine of res judicata. To permit a claim to revisit the offset over an 11-year period would only encourage claimants to refrain from pointing out an error in the hope that after several years had passed the employer/carrier would no longer be in a position to defend the basis for which the offset was taken.14
Effect of Receipt of Social Security Disability Benefits
InHyatt v. Larson Dairy, Inc., 589 So. 2d 367 (Fla. 1st DCA 1991), Hyatt filed an amended claim for benefits on January 26, 1990, claiming the correct social security offset should be calculated without factoring the permanent total disability supplemental benefit. Hyatt claimed he was due the supplemental benefit in addition to the compensation rate. The judge of compensation claims disagreed with Hyatt’s method of calculating the social security offset, and the court agreed with the judge. The legislature’s intent to include supplemental benefits within those benefits subject to the 80 percent cap of the social security offset is clear.15
Hunt v. D.M. Stratton, Jr., 677 So. 2d 64 (Fla. 1st DCA 1996), provided a methodology by which the offset may be calculated. The first step is to calculate 80 percent of the average weekly wage and 80 percent of the weekly average current earnings, the greater of which is used in the ensuing calculations. The next step is to determine the total amount of benefits the claimant is receiving on a weekly basis without any offset, and the difference between that figure and the figure from the first step. The next step is to determine whether the preliminary offset amount exceeds the offset which the federal government would otherwise have taken. This will determine whether the preliminary offset amount exceeds the total amount of social security benefits due a claimant and his or her family, which is the maximum federal social security offset allowed under 42 USC §424(a), and, therefore, the maximum workers’ compensation offset allowed under F.S. §440.15(9)(a). Because the preliminary offset exceeded the total amount of social security benefits due the claimant and his family, the latter is the maximum allowable offset.The court ruled in Florida Power Corp. v. Van Loan, 764 So. 2d 708 (Fla. 1st DCA 2000), that the weekly benefits payable to the claimant were capped at the maximum compensation rate pursuant to F.S. §440.12(2). Citing City of St. Petersburg v. Nasworthy, 751 So. 2d. 772 (Fla. 1st DCA 2000), and F.S. §440.15(10)(a), the court concluded that the employer/carrier correctly subtracted the offset from the maximum compensation rate rather than the actual compensation rate or 66 2/3percent average weekly wage. However, the court also concluded that the judge of compensation claims correctly determined that the offset should be calculated using permanent total disability supplemental benefits from the year the claimant became entitled to benefits, rather than from the year when employer/carrier begins taking the offset. Citing Pickard, Hunt, and Hyatt, the court indicated that to permit otherwise would provide an incentive to delay calculating the offset.
In Dixon v. Bio Lab Inc., 767 So. 2d 443 (Fla. 2000), the Supreme Court, citing F.S. §440.15(10), 42 USC §424a,Grice, and Acker, ruled that whenever workers’ compensation and SSD benefits are payable, the offset cannot decrease total benefits below 80 percent of average weekly wage or average current earnings, whichever is greater. In other words, no offset can be had beyond the 80 percent limit, even though the claimant may be receiving in excess of 100 percent of the average weekly wage.
When reading Dixon, Grice, and the relevant statutes in tandem, a claimant’s SSD benefit may be offset, but only to the extent it does not reduce total benefits to less than 100 percent of the claimant’s average weekly wage (Grice) or 80 percent of his or her monthly average current earnings (Dixon), whichever is greater.16 In Miami Dade County v. Lovett, 888 So. 2d 136 (Fla. 1st DCA 2004), 100 percent of claimant’s monthly average weekly wage was greater than 80 percent of his monthly average current earnings. Therefore, claimant’s benefits could not be reduced below 100 percent of his or her average weekly wage.
Effect of Receipt of Social Security Family Benefits
Dax & Trim Development Company v. Mullens, 590 So. 2d 539 (Fla. 1st DCA 1992), indicated that the plain language of the statute directs that all social security benefits received by the employee and his dependents be considered in calculating the amount that should not exceed 80 percent of the employee’s average weekly wage. The case was remanded with directions that the amount of the social security offset be recalculated. In so doing, the total amount of benefits received by claimant and his dependents should be considered in calculating the amount that should not exceed 80 percent of claimant’s average weekly wage or average current earnings.
In Elite Tile & Marble v. Burnett, 731 So. 2d 725 (Fla. 1st DCA 1999), the judge of compensation claims did not use the maximum federal social security offset, as mandated by Hunt. This was in error. The offset in this case must be recalculated according to the Hunt formula by using the amount of weekly social security benefits, including family benefits, to properly figure out the maximum social security offset.
Effect of Workers’ Compensation Benefit Increase
The judge of compensation claims in City of Clearwater v. Acker, Hahn and Rowe, 755 So. 2d 597 (Fla. 1999), held that it was proper for the pension offset to be recalculated annually to include increases in supplemental benefits. The court reversed the judge of compensation claims’ decision, holding annual increases in supplemental benefits should not be used to calculate offsets. The court indicated that it is undisputed that the legislature intended supplemental benefits to provide cost-of-living increases for permanently and totally disabled workers to account for the impact of inflation. To hold otherwise would render the supplemental benefits statute virtually meaningless. The legislature never contemplated offsets would be annually recalculated to encompass increases in supplemental benefits made after the initial determination of benefits.
In Jackson v. Hochadel Roofing Co., 764 So. 2d 668 (Fla. 1st DCA 2001), the employer/carrier accepted the claimant on permanent total disability and began paying permanent total disability plus supplemental benefits. The claimant then began receiving SSD benefits. The employer/carrier then began taking a weekly offset against claimants compensation benefits pursuant to F.S. §440.15(9). Each year thereafter, the employer/carrier increased its offset because of the annual increase in supplemental benefits. The claimant disagreed. The judge of compensation claims employed the methodology in Hunt and calculated the offset by using supplemental benefits payable the year Jackson became permanently total disabled, rather than the year the employer/carrier first became entitled to take the offset. The court ruled that the judge of compensation claims was correct on both counts.
Raymond James & Associates v. Smith, 860 So. 2d 1081 (Fla. 1st DCA 2003), reaffirmed the concept that Florida is considered a reverse offset state, allowing the state workers’ compensation carrier to take the offset against compensation benefits, whether permanent or temporary benefits. Citing Acker, Hochadel Roofing, Van Loan, and Herny, the court held that having taken an offset against temporary compensation benefits, the employer/carrier cannot recalculate the offset to take permanent total disability supplemental benefits into account when claimant is accepted or adjudicated permanently total disabled. Doing otherwise would render the permanent total disability supplemental benefits insignificant, frustrating their purpose to allow for increases in the cost of living.
Effect of Social Security Benefit Increases
Cost of living increases from federal social security benefits are excluded from offset computations.17 Since there is no provision in the federal law for including federal SSD cost of living increases in computing the federal offset, it follows that the state offset cannot exceed the amount that the federal offset otherwise would have been. Consequently, the amount of the offset is calculated at the time of the initial entitlement and the federal cost of living increases cannot be included in the calculation.18
Effect of Receipt of Collateral Source Benefits and Increases
In Escambia County Sheriff’s Dept. v. Grice, 692 So. 2d 896 (Fla. 1997), Grice argued that he was entitled to workers’ compensation and disability benefits, with the only offset being that which is statutorily allowed for SSD benefits. The court disagreed and concluded that the county may offset Grice’s workers’ compensation benefits to the extent that the total of his workers’ compensation, disability retirement, and SSD benefits exceed his average weekly wage.19
The court remanded Alderman v. Florida Plastering, 732 So. 2d 326 (Fla. 1st DCA 1998), to the judge of compensation claims for proper calculation of the offset, based upon the Hunt formula. On remand, the judge should determine from the evidence the figures necessary to complete the Hunt offset formula, including federal offset for comparison and average compensation earned. The judge must then determine the initial offset, using the dollar amounts of workers’ compensation and social security benefits that the claimant received. Once this initial offset is determined, the judge may not order recalculation based on any cost-of-living increases in the claimant’s collateral benefits thereafter.
However, the court also ruled that recalculation of the offset is allowed as of the date the claimant began receiving state disability retirement benefits. Hunt prohibits recalculation of an offset based on any cost-of-living increase in a particular benefit. However, it does not forbid recalculation of an existing offset when a claimant who has been receiving one type of collateral benefit (e.g., social security) later begins receiving yet another type of benefit (e.g., state disability retirement). Alderman began receiving social security benefits and two years later began receiving state disability retirement benefits in addition to his other benefits. The judge should, therefore, order recalculation of the offset one time to account for the addition of the new collateral benefit the claimant began receiving. No further recalculation is allowed for the cost of living increases.
In Americana Dutch Hotel v. McWilliams, 733 So. 2d 536 (Fla. 1st DCA 1999), the judge of compensation claims permitted the employer/carrier to offset claimant’s workers’ compensation benefits because of receipt of social security disability benefits by using Hunt and then further allowed a reduction in claimant’s permanent total disability supplemental benefits by using Grice. The court, however, determined that it is permissible that claimant’s Hunt-reduced compensation benefits, permanent total disability supplemental benefits, and social security benefits exceed 100 percent average weekly wage so long as benefits payable by the employer/carrier do not exceed the maximum weekly compensation rate payable or in effect at the time of payment.20
Again, in City of Hollywood v. Lombardi, 770 So. 2d 1196 (Fla. 2000), the court found that F.S. §440.21(1) prohibits an employee from contributing to his or her workers’ compensation benefits. Accordingly, it holds that where the pension plan is funded at least in part with the employees’ contributions, decreasing workers’ compensation benefits on account of pension benefits runs afoul of F.S. §440.21 (1993). Thus, once it is determined that the pension plan is funded with employees’ contributions, workers’ compensation benefits are primary and it is the pension fund that is entitled to the benefit of the offset. As applied to Lombardi, where the fund is employee contributory, it would violate F.S. §440.21 for workers’ compensation benefits to be reduced. The court agreed with the First District that because the emphasis is on preventing the claimant from receiving total benefits from workers’ compensation benefits and other collateral sources in excess of 100 percent of the claimant’s average weekly wage, it is reasonable to determine the lien reduction before the offset.
In HRS v. Pascual, 785 So. 2d 509 (Fla. 1st DCA 2000), the judge of compensation claims issued an order agreeing that Pascual was entitled to a one percent credit based upon her contribution to the state disability retirement benefits fund and that the employer/carrier was not permitted to take any offsets for costs of living adjustments to Pascual’s permanent total disability supplements and state disability retirement.CitingCity of Hollywood v. Lombardi,738 So. 2d 491 (Fla. 1st DCA 1999), the court concluded again that the claimant is entitled to a credit for her pro rata contribution to the state disability retirement plan. The judge of compensation claims correctly concluded that Pascual was entitled a one percent credit but that the remaining 99 percent of state disability retirement benefits should be factored into the Grice calculation. Moreover, citing Acker, Hahn, Rowe, and Alderman, the court reiterated its prior rulings that subsequent recalculations of the Grice offset are not permissible for cost of living adjustments in permanent total disability supplemental benefits and state disability retirement benefits.
The employer/carrier in State of Florida v. Herny, 781 So. 2d 1067 (Fla. 2001), included a collateral source benefit cost of living increase in calculating Grice offset. The claimant argued that such cost of living increases were not includable when calculating an offset. The judge of compensation claims, DCA, and Supreme Court agreed, indicating that the employer/carrier could only offset the initial in-line-of-duty disability benefit but not any cost of living increases thereafter. No offset recalculation was allowed because of cost of living adjustments.
The judge of compensation claims held in Orange County Fire Rescue v. Antonelli 794 So. 2d 758 (Fla. 1st DCA 2001), that the employer/carrier was entitled to assert the offset retroactively to May 1, 1997, but that supplemental benefits were not includable in the offset calculation formula. The court agreed with the judge of compensation claims on both counts indicating that since supplemental benefits are designed to provide a cost of living adjustment to injured workers to protect the value of their benefits from inflation. Logic dictates that no such benefits should be included in a Grice offset calculation; otherwise, the purpose of supplemental benefits would be frustrated.
Effect of Employer/Carrier Waiting to Take Offset
After the claimant has executed a request for SSD benefits information form (LES DWC-14) and furnished it to the employer/carrier in a timely fashion, and employer/carrier forwarded the executed form to the Social Security Administration and received information about SSD payments timely, but employer/carrier waits close to a year to file a notice of action/change asserting a social security offset, when does employer/carrier’s right to offset compensation benefits begin? In Monroe v. Publix, 790 So. 2d 1249 (Fla. 1st DCA 2001), the judge of compensation claims concluded that the employer/carrier was entitled to offset benefits beginning the date they sent the LES DWC-14 form to the SSA. The court, however, indicated that in the absence of any reasonable explanation for the employer/carrier’s delay in exercising its right to the setoff, allowing a retroactive setoff would work undue hardship on the claimant. Therefore, employer/carrier can only take offset from the date it filed the notice of action/change.
In Upson v. Orange County School Board, 811 So. 2d 733 (Fla. 1st DCA 2002), the judge of compensation claims relied on Brown v. L.P. Sanitation, 689 So. 2d 332 (Fla. 1st DCA 1997), to deny claimant’s claim for payment of permanent total disability benefits without the 20 percent deduction. The court concluded that per F.S. §440.15(9)(a), the employer/carrier cannot take any reduction in compensation benefits after claimant reaches age 62. The court also concluded that per F.S. §440.15(9)(c), the employer/carrier cannot take an offset until the SSA verifies the amount of benefits claimant receives. Since employer/carrier neglected to request the social security information until almost four years after it accepted the claimant permanent total disability, and the year when claimant turned 62 years of age (therefore no longer receiving disability benefits), allowing the employer/carrier to deduct 20 percent would cause claimant hardship and reward the employer/carrier for failing to preserve its own interests in a timely manner.
Pursuant to §224 of the Social Security Act, disability insurance benefits are reduced if the individual is also entitled to periodic benefits under a workers’ compensation law or plan of the U.S. or any state, due to a temporary or permanent total or partial disability. However, such a reduction is not made if the workers’ compensation law or plan under which the periodic benefits are payable provides for the reduction of the periodic benefit when anyone is entitled to disability insurance benefits under §223 of the act. Florida, along with a minority of other states, falls within this reverse offset situation. examining Florida’s statutory authority for such an offset, and how the state appellate courts have dictated the calculation of the reduction available to employer/carriers paying weekly disability benefits, workers’ compensation/social security practitioners should be aware of the workers’ compensation/social security offset based on Florida’s law.
1 42 U.S.C.§424a.
3 20 C.F.R. §404.408.
4 Fla. Stat. §440.15(10).
5 Department of Public Health, Division of Risk Management v. Wilcox, 543 So. 2d 1253 (Fla. 1989).
6 Florida Power & Light Co. v. Aitkins, 377 So. 2d 57 (Fla. 1st D.C.A. 1979).
7 Quail Ridge v. Johnson, 584 So. 2d 199 (Fla. 1st D.C.A.1991).
8 Colonel’s Table v. Malena, 412 So. 2d 64 (Fla. 1st D.C.A. 1982).
9 Thomas v. Sunland Training Center, 408 So. 2d 685 (Fla. 1st D.C.A. 1982).
10 Trilla v. Braham Cadillac, 527 So. 2d 873 (Fla. 1st D.C.A.1988).
11 Good Housekeeping Gas Company v. Kitler, 492 So. 2d 700 (Fla. 1st D.C.A. 1986).
12 Pate v. Maddox Foundry & Machine, 414 So. 2d 524 (Fla. 1st D.C.A. 1982);Pensacola Buggy Works v. Jernigan, 377 So. 2d 245 (Fla. 1st D.C.A. 1979);Florida Dept. of Transportation v. Lindsey, 383 So. 2d 956 (Fla. 1st D.C.A. 1980).
13 Monroe v. Publix, 790 So. 2d 1249 (Fla. 1st D.C.A. 2001).
14 Boynton Landscape v. Dickinson, 752 So. 2d 1236 (Fla. 1st D.C.A. 2000).
15 Division of Workers’ Compensation v. Hooks, 515 So. 2d 294, 295 (Fla. 1st D.C.A. 1987).
16 See Fla. Stat. §§440.15(10)(a), and 440.20(15).
17 Great Atlantic & Pacific Tea Co. v. Wood, 380 So. 2d 558 (Fla. 1st D.C.A. 1980); Eques v. Best Knit Textile Corp., 382 So. 2d 736 (Fla. 1st D.C.A. 1980).
18 Carballo v. Warren Manufacturing, 407 So. 2d 603 (Fla. 1st D.C.A. 1981); Hunter v. South Florida Sod, 666 So. 2d 1018 (Fla. 1st D.C.A. 1996).
19 Barragan v. City of Miami, 545 So. 2d 252 (Fla. 1989); Brown v. S.S. Kresge Co., 305 So. 2d 191 (Fla. 1974); and Domutz v. Southern Bell Tel & Tel Co., 339 So. 2d 636 (Fla. 1976).
20 See also HRS v. Monroe, 744 So. 2d 1163 (Fla. 1st D.C.A. 1999)
Rafael Gonzalez, Tampa, earned his B.S. from the University of Florida and his J.D. from Florida State University. He is past chair of the Bar’s Workers’ Compensation Section and Practice Management Development Section. He is presently an adjunct professor at Stetson University College of Law.