SSR 87-21c: SECTION 224 OF THE SOCIAL SECURITY ACT (42 U.S.C. 424a) DISABILITY INSURANCE BENEFITS -- REDUCTION OF BENEFITS -- PRORATION OF LUMP-SUM WORKERS' COMPENSATION SETTLEMENTS
20 CFR 404.408
Mann v. Heckler, 1A Unempl. Ins. Rep. (CCH) ¶ 16,952 (D. Me. March 17, 1986), aff'd, 802 F.2d 440 (1st Cir. 1986).
- The Social Security disability benefits payable on the claimant's earnings record were subject to reduction (offset) under 42 U.S.C. 424a because of the claimant's receipt of a lump-sum workers' compensation (WC) settlement. In determining the amount at which the lump-sum settlement should be prorated before offsetting it against the Social Security disability benefits, an administrative law judge (ALJ) followed the practice of the Social Security Administration which is to prorate lump-sum awards at an established weekly rate. Since no rate had been specified in he lump-sum award, the ALJ used the weekly WC rate at which the claimant had been paid prior to the lump-sum award. On appeal, the claimant contended that the ALJ should have prorated the lump-sum settlement over the claimant's life expectancy. The claimant argued that, because Maine does not limit the duration during which an injured employee may receive WC benefits, he was eligible to collect WC payments for the rest of his life. Therefore, the claimant asserted that the lump-sum award represents a settlement of claims extending over his entire lifetime. The claimant further argued that, absent a provision in the award to the contrary, he should be entitled to a presumption that the award does represent a settlement of claims extending over his entire lifetime. Under 42 U.S.C. 424a(b), the Secretary is required, for WC offset purposes, to calculate a reduction that will "approximate as nearly as practicable" a reduction based upon receipt of monthly payments. Since it is implicit in the statutory language "approximate as nearly as practicable" that the Secretary's administrative discretion is involved, the district court found that it could not say that the Secretary had violated that discretion in the claimant's case. The court noted that the lump-sum award had not explicitly stated a rate and, that because the award was a compromise settlement, there was no legal basis for assuming that it was based upon the claimant's life expectancy. The court also noted that there was nothing in Maine's WC law which provided for a lifetime presumption in the absence of any provision to the contrary. In view of the foregoing, the court concluded that it was reasonable for the Secretary to prorate the claimant's lump-sum WC award at the prior weekly WC benefit rate for purpose of offsetting it against the disability benefits that were payable on the claimant's earnings record. Accordingly, the district court held that the Secretary's decision was affirmed.
The issue in this Social Security Disability appeal is whether, in setting off Workers' Compensation benefits against Social Security disability benefits, the Administrative Law Judge erred in refusing to prorate a lump-sum settlement over the plaintiff's life expectancy, and in using instead the monthly Workers' Compensation payment the plaintiff had previously been receiving.
The plaintiff has been receiving disability insurance benefits since April 22, 1975. Beginning April 22, 1975, he also began receiving a weekly Workers' Compensation payment of $105.15. On June 22, 1977, he received two lump-sum settlement awards of his Workers' Compensation claims in the gross amounts of $32,047.90 and $4,180.00. Receipt of these lump-sum settlements required an inquiry of whether, and if so, how much,a the plaintiff's and his family's social security benefits should be reduced. 42 U.S.C. § 424a; 20 C.F.R. § 404.408. The matter came before an Administrative Law Judge who had to determine the amount at which the lump-sum settlement should be prorated before offsetting it against the Social Security Disability benefits.
The Administrative Law Judge followed the practice of the Social Security Administration which is to prorate lump-sum awards at an established weekly rate. The methods for establishing weekly rates, as set forth in the Administration's Program Operational Manual, DI00203.335D, in descending order of priority are as follows:
- 1. The rate specified in the lump-sum award.
- 2. The periodic rate paid prior to the lump sum (if no rate is specified in the lump-sum award).
- 3. If Workers' Compensation, the state's Workers' Compensation maximum in effect in the year of injury. This figure can be used if no rate is specified in the award or there was no proceeding periodic benefit.
The Administrative Law Judge found that he could not use the first procedure because no rate was specified in the lump-sum settlement award. He therefore selected the second method and prorated the settlement award according to the prior periodic rate of $105.15.
The plaintiff argues that the Administrative Law Judge should have prorated the lump-sum settlement over his life expectancy. He argues that because Maine does not limit the duration during which an injured employee may receive Workers' Compensation benefits, he was eligible to collect Workers' Compensation payments for the rest of his life. He asserts that the lump-sum award therefore represents a settlement of claims extending over his entire lifetime. He further argues that, in the absence of a provision in the award to the contrary, he should be entitled to a presumption that the award does represent a settlement of claims extending over his entire lifetime.
In cases where receipt of Workers' Compensation lump-sum settlement award requires a reduction of disability benefits, 42 U.S.C. § 424a(b) [sic] directs the Secretary to calculate a reduction that will "approximate as nearly as practicable" a reduction based upon receipt of monthly payments. The provision requires the Secretary to prorate the lump-sum settlement so as to approximate periodic payments. It is implicit in the statutory language "approximate as nearly as practicable" that the Secretary's administrative discretion is involved in the process.
Here, the court cannot say that the Secretary has violated that discretion. The lump-sum award does not explicitly state aa rate. Furthermore, because the award was a compromising settlement, there is no legal basis for assuming that the settlement was based upon the plaintiff's life expectancy. For all the court knows or the Secretary could determine, the parties may have concluded that the plaintiff's disability claims would not last a lifetime, but only for a specific term of years and reached their settlement based upon that view. Certainly, there is nothing in 39 M.R.S.A. § 71 which provides for a lifetime presumption in the absence of any provision to the contrary; it merely provides that an employer shall be discharged from all further liability upon payment of a lump sum. I find, therefore, that it was reasonable for the Secretary to proceed to the second method, that of using the rate paid prior to the lump-sum award, in calculating the setoff.
Accordingly, the decision of the Secretary is AFFIRMED; and the Clerk's Office is hereby ORDERED to enter judgment for the defendant affirming the decision of the Secretary.
DATED at Portland, Maine, this 14th day of March, 1986.
Pursuant to the Order of the Court as filed in the above-entitled action on March 14, 1986, it is
ORDERED that the plaintiff's motion for summary judgment is denied; and Judgement is hereby entered affirming the decision of the defendant Secretary and dismissing the Complaint.
Dated at Portland, Maine this 17th day of March, 1986.
 The action is properly brought under 42 U.S.C. § 405(g). The Secretary has admitted that the plaintiff has exhausted his administrative remedies. The parties have consented to have the United States Magistrate conduct all proceedings in the case and order the entry of judgment. The case is presented by the plaintiff's itemized statement of the specific errors upon which the plaintiff seeks reversal of the Secretary's decision. The case was argued orally before the U.S. Magistrate on March 5, 1986, pursuant to Local Rule 12(b) requiring the parties to set forth at oral argument their respective positions with citation to relevant statutes, regulations, case authority and page references of the administrative record.
 At oral argument, a copy of the pertinent part of the Manual was provided to the court by the Secretary's counsel without objection.
The court granted the plaintiff's counsel until March 12, 1986, to notify the court if there was any question whether these provisions are the ones in effect at the relevant times. No such notification was received.
 At oral argument, the court granted the plaintiff until March 12, 1986, to provide the court with any evidence that the Secretary has adopted a new method of prorating Workers' Compensation lump-sum settlements based on the claimant's life expectancy. No such showing has been made.
 The plaintiff's motion for summary judgment, filed before amended Local Rule 12(b) went into effect, is DENIED.