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S T A T E   O F   M A I N E

WORKERS' COMPENSATION BOARD

27 State House Station

Augusta, Maine  04333-0027

FAX (207) 287‑7198

TEL (207) 287‑7086

 

MEMORANDUM

 

Date Sent:  Sep 18 2009

 

           TO:     Parties Interested in Board Rulemaking

 

   SUBJECT:     Adopted Rules

Rule Chapter 9(2) - Coordination of Benefits Pursuant to

Section 221(1) & (3)

 

 

 

The Maine Workers' Compensation Board has adopted the attached rules.  The effective date of the rules is September 16, 2009.

 

 

AGENCY CONTACT PERSON:    John C. Rohde, General Counsel

                    AGENCY NAME:     Workers' Compensation Board

                             ADDRESS:     27 State House Station

                                                   Augusta, Maine  04333-0027

                         TELEPHONE:     207-287-7086

                                  EMAIL:     lynne.mckenney@maine.gov

 

 

Please Note:       Most offices will only receive one copy of this notification.  Please ensure that copies are distributed to your staff.  Thank you.

If you no longer wish to receive these mailings, please contact:

Lynne McKenney, Secretary Associate Legal

Workers' Compensation Board

27 State House Station

Augusta, Maine  04333-0027

Tel:  (207) 287-7086 / Fax:  (207) 287-7198

Email:  Lynne.McKenney@Maine.gov

It would be helpful if you would include the three digit code located on the mailing label when writing or calling.


 

 

                                                                                                                                                  MAPA-4

                     Notice of Agency Rule-making Adoption

 

 

AGENCY:  WORKERS’ COMPENSATION BOARD

 

 

CHAPTER NUMBER AND TITLE:  Rule Chapter 9(2) - Coordination of Benefits Pursuant to Section 221(1) & (3)

 

 

ADOPTED RULE NUMBER: 

(LEAVE BLANK - ASSIGNED BY SECRETARY OF STATE)

 

 

CONCISE SUMMARY  (UNDERSTANDABLE BY AVERAGE CITIZEN):

 

This rule establishes a method for calculating a reduction of weekly benefits when an employee receives a lump sum or periodic payment over a period less than the employee’s life expectancy pursuant to a self-insurance wage continuation, disability insurance policy, pension, or retirement policy established or maintained by the employer.

 

 

 

 

 

EFFECTIVE DATE  (TO BE FILLED IN BY SECRETARY OF STATE):

 

 

AGENCY CONTACT PERSON:      John C. Rohde, General Counsel

                          AGENCY NAME:      Workers’ Compensation Board

                                    ADDRESS:      27 State House Station

Augusta, Maine  04333-0027

                               TELEPHONE:      207-287-7086

                                           EMAIL:      lynne.mckenney@maine.gov

 

 

                                      Please approve bottom portion of this form and

                                              assign appropriate MFASIS number.

 

APPROVED FOR PAYMENT                                                       DATE:                     

Authorized signature

FUND             AGENCY           ORG            APP           JOB             OBJT             AMOUNT

014                 90C                    2001            01

 

 


90-351                         WORKERS, COMPENSATION BOARD

 

Chapter 9:        PROCEDURE FOR COORDINATION OF BENEFITS

 

 

This rule describes the procedures to be followed in calculating and performing the coordination of benefits required under 39-A M.R.S.A. § 221.

 

§ l.       Any reduction in weekly workers, compensation benefits which results from the coordination of benefits described in Title 39-A shall be indicated on the Discontinuance or Modification of Compensation (WCB-4) filed pursuant to Rule 8.1. The employer or insurer shall indicate which type of benefit is the subject of coordination and the mathematical calculations used in determining the new level of weekly compensation benefits.

 

§ 2.      Coordination of benefits pursuant to § 221(3).

 

(A)       Except as provided in paragraph (B) of this section, wWhen an employee receives payments pursuant to a plan or policy subject to § 221(1)(B) or (C), the amount by which weekly benefits may be reduced of the reduction to the employee’s weekly benefits is calculated by converting the weekly payment into an after-tax amount using the tables of average weekly wage and 80% of the after tax average weekly wage published by the Board pursuant to 39-A M.R.S. § 102(1) and then multiplying the applicable 80% of the after-tax amount by 1.25.

 

(B)       When an employee receives a benefit that is intended to be paid over the employee’s lifetime in a lump sum or a periodic payment for a permanent or lifetime condition paid over a period less than the employee’s life expectancy pursuant to a plan or policy subject to § 221(1)(B) or (C), the amount by which weekly benefits may be reduced of the reduction to the employee’s weekly benefits is calculated by:

 

(1)        determining the employee’s life expectancy based on standard actuarial tables in weeks,

 

(2)        determining a weekly benefit amount by dividing the lump sum amount by the number of weeks of life expectancy determined pursuant to sub-section B paragraph (1) of this section;

 

(3)        converting the weekly benefit amount determined pursuant to sub-section B paragraph (2) of this section into an after-tax amount using the tables of average weekly wage and 80% of the after tax average weekly wage published by the Board pursuant to 39-A M.R.S. § 102(1). ; and,

 

(4)        multiplying the applicable 80% of the after-tax amount by 1.25.

 

(C)       This regulation applies retroactively to all pending cases including those on appeal.

 

 


CHAPTER 9 § 2

COORDINATION OF BENEFITS PURSUANT TO

39-A.M.R.S. §§ 221 (1) & (3)

 

BASIS STATEMENT

 

            The amendment to Chapter 9 establishes a method for calculating a reduction of weekly benefits when an employee receives a lump sum or periodic payment over a period less than the employee’s life expectancy pursuant to a self-insurance wage continuation, disability insurance policy, pension, or retirement policy established or maintained by the employer.

 

SUMMARY OF COMMENTS

 

            Commentators 5, 7, 8 and 9 state that their unions have negotiated life insurance benefits that can be converted to a lump sum if a member suffers total and permanent disability.  They state that the benefit was designed to supplement income in such situations.  These commentators believe the Nichols case was decided incorrectly because it failed to recognize the intent of these policies.

 

Response:  The Board does not believe it can address this issue through rulemaking, but may submit legislation that would address it.

 

            Commentators 2, 5, 7, 8 and 9 believe that the proposed rule is fair in that it recognizes that the lump sum payments negotiated by the unions are intended to last for an individual’s lifetime.  They also state that the proposed rule reduces the real-world impact of Nichols by spreading the offset over a longer period of time thus permitting employees to experience a greater degree of financial stability when it is most needed.

 

Response:  The Board believes the adopted rule will have this intended effect.

 

            Commentator 5 describes the hardship she has endured because of the offset that was taken in her case.

 

Response:  The Board appreciates Commentator 5’s comments.

 

            Commentators 7, 8, and 9 also state that, in the wake of the Nichols decision, employers are now trying to retroactively recoup the value of such payments by suspending workers’ compensation payments.

 

Response:  The Board has addressed this concern by including a section that makes application of the rule retroactive.

 

            Commentators 1, 3, 4, 6 and 10 believe that rule should exactly mirror the Act and that section 2 (A) of the rule should either be eliminated (as redundant) or amended to include the 1.25 multiplier.

 

Response:  The Board has addressed this issue by including the 1.25 multiplier.

 

            Commentators 1, 3, 4, 6 and 10 believe that the rule may result in employees receiving a double recovery.

 

Response:  The Board disagrees with this assertion; rather, the rule achieves a measure of equity in determining offsets pursuant to §§ 221 (1) & (3).

 

            Commentators 4, 6 and 10 believe that employers should be entitled to a “holiday” equal to the amount of the after tax amount of the lump sum payment (i.e. – a complete cessation of payments until the value of the payment has been exhausted). 

 

Response:  The Board does not believe this approach represents an equitable method of implementing §§ 221 (1) & (3).

 

            Commentators 4, 6 and 10 believe that the offset for a lump sum payment should be calculated as follows:

 

            1.  Divide the gross amount of the benefit by 52 to determine a gross weekly amount.

 

            2.  Apply the weekly benefits table to the gross weekly amount to arrive at the 80% after tax weekly benefit amount.

 

            3.   Multiply the 80% after tax weekly benefit amount by 1.25.

 

            4.  Multiply the result of paragraph 3 by 52.

 

            5.  Allow the employer to cease paying benefits until the entire amount is exhausted.

 

Response:  As stated above, the Board believes the rule adopted rule implements §§ 221 (1) & (3) more equitably and notes that this method would not work with larger amounts of money because the weekly benefit table published by the Board does not include the 80% after tax weekly benefit amount for such sums.

 

            Commentator 3 believes that the language of the rule is too broad and that, if adopted, its application should be limited to benefits that are intended to be lifetime payments.

 

Response:  The Board agrees with this comment and has added language clarifying that the rule only applies to benefits that are intended to be lifetime payments.

 

            Commentator 3 believes that the offset should be done pursuant to the calculation used in the Foley; that is, instead of using the amount of the lump sum payment calculated over the life expectancy of the employee, use the monthly amount that the employee could have opted for as the basis of the offset.

 

Response:  The Board believes the adopted rule represents a more equitable method of implementing §§ 221 (1) & (3).

 

            Commentator 3 believes that life expectancy may not be amenable to a “one size fits all” definition.  (Commentator 3 did not offer an alternative.)

 

Response:  The Board added a provision requiring the use of standard actuarial tables to clarify this section.

 

            Commentators 1 and 3 believe that the rule does not recognize the time value of money.

 

Response:  The Board believes the adopted rule represents an equitable method of implementing §§ 221 (1) & (3) that recognizes this as well as other pertinent factors.

 

 

            Commentator 1 believes that using 80% of the after tax weekly wage improperly minimizes the “after tax” impact of the offset.

 

Response:  The use of 80% of the after tax weekly wage is required by statute.

 

 

COMMENTATORS

 

 1.  American Insurance Association; John P. Murphy, Vice President.

 

 2.  Maine AFL-CIO; Benjamin Grant, Esq. (oral), James W. Case, Esq. (written).

 

 3.  Maine Employers’ Mutual Insurance Company; Allan M. Muir, Esq.

 

 4.  Maine Pulp & Paper Association; John S. Williams, President.

 

 5.  Pamela Puiia, (oral and written).

 

 6.  Sappi Fine Paper North America; Kevin M. Gillis, Esq. (oral and written).

 

 7.  United Steelworkers Local 900; Matt Bean, President.

 

 8.  United Steelworkers Locals 9, 900 and 1069; James J. MacAdam, Esq. (oral and written).

 

 9.  United Steelworkers Local 1069; Brian Wade, President.

 

10.  Workers’ Compensation Coordinating Council; Martha F.H. Mayo, Executive Director.

 

 


                                           Rule-Making Fact Sheet

                                                            (5 MRSA  § 8057-A)

 

AGENCY:  WORKERS’ COMPENSATION BOARD

 

NAME, ADDRESS, PHONE NUMBER OF AGENCY CONTACT PERSON:

John C. Rohde, General Counsel, Workers’ Compensation Board, 27 State House Station, Augusta ME  04333-0027  TEL:  208-287-7086 

EMAIL:  John.Rohde@Maine.gov

 

CHAPTER NUMBER AND RULE TITLE:  Rule Chapter 9(2) - Coordination of Benefits Pursuant to Section 221(1) & (3)

 

 

STATUTORY AUTHORITY:  39-A M.R.S.A. §§ 152(2) and 221(1) & (3)

 

DATE AND PLACE OF PUBLIC HEARING:  Monday, June 1, 2009, 9:00 a.m.,

Workers' Compensation Board, Central Office, AMHI Complex, Deering Building, First Floor, Room 170, Hospital Street, Augusta, Maine

 

COMMENT DEADLINE:  Thursday, June 11, 2009, 5:00 p.m.

 

PRINCIPAL REASON OR PURPOSE FOR PROPOSING THIS RULE:

A method for calculating offsets has not previously been established.  This rule will establish a uniform method of calculating offsets pursuant to §§ 221(1) & (3).

 

 

 

ANALYSIS AND EXPECTED OPERATION OF THE RULE:

This rule will prevent disputes over appropriate offsets by establishing a uniform method of calculating offsets.

 

 

 

FISCAL IMPACT OF THE RULE:   

 

 

  FOR RULES WITH FISCAL IMPACT OF $1 MILLION OR MORE, ALSO INCLUDE:

 

ECONOMIC IMPACT, WHETHER OR NOT QUANTIFIABLE IN MONETARY TERMS:

 

INDIVIDUALS OR GROUPS AFFECTED AND HOW THEY WILL BE AFFECTED:

 

BENEFITS OF THE RULE:

 

 

                                            Note:  If necessary, additional pages may be used.