An Overview of Benefits for the New Year

Saturday, December 30, 2006 | 0

By Mike Sullivan

With the onset of the New Year, now is a good time for carriers and TPAs to assess their obligations with regards to new benefits rates going into effect January 1. AB 749, which was passed in 2002, set forth a schedule of annual benefits increases and terms for their application. It remains the basis for the rates employers will be paying in the coming year.

This article presents an overview of the different types of benefits and the impending changes for each.

1. Temporary Disability Benefits.

The amount of temporary disability owed is calculated based on two-thirds of the average weekly wage of the injured worker subject to a statutory minimum and maximum rate.

AB 749 established a minimum TD rate for dates of injury on or after January 1, 2003 of $126 per week. (For injuries before that date, the payment would be the subject to the minimum rate of $126 per week or the actual wage of the worker, whichever was lower.)

With the passage of AB 749, it no longer mattered what the applicant made; the minimum TD level applied. This could even result in the absurd situation where an applicant made more money receiving TTD than he did in actual wages. Nevertheless this position remains the law. (One case I found agreeing with this is Signature Fruit v. WCAB 142 Cal.App.4, 790.) Therefore, regardless of what the worker was earning, even if it was nothing, the minimum rate will apply.

The minimum rate of $126 per week has remained in place since; however, beginning in 2007, it will increase annually. The rate of increase shall be determined based on an annual examination of the percentage increase in the state average weekly wage as compared to the prior year. Temporary disability increases every year from 2007 forward, as long as the average wage of workers in the state increases. This increase is determined by the unemployment insurance records and reported by the United States Department of Labor for California. This organization has a website which gives the necessary guidance. For this year there is an increase of 4.96%; for dates of injury that occur in 2007 the minimum TD payment will be $132.25 per week.

Labor Code Section 4453 sets forth the maximum temporary disability payment in any given case based upon the date of injury, as shown below:

DATE OF INJURY - MAXIMUM TD

January 1, 2003 - $602

January 1, 2004 - $728

January 1, 2005 - $840

January 1, 2006 - $840

January 1, 2007 - $881.66 (due to annual increase)

As for the minimum rate, after January 1, 2007, future annual increases in the maximum rate are to be determined based on the same percentage increase in the state average weekly wage as compared to the prior year as used for the minimum rate. (There was a provision for a possible increase beyond the maximum for 2006 injuries, but the state wage numbers did not justify it.) With this year's increase of 4.96%, the 2007 maximum TD payment shall be $881.66, as shown in the table above.

A special note needs to be made regarding temporary disability payments made pursuant to Labor Code section 4661.5. That section provides that temporary disability benefits provided two years after the date of injury are paid at the rate allowed by statute. That will be a continuing annual adjustment. Therefore it will be important to be ready in 2007. Note that for any increase to apply, the applicant's AWW will have to exceed $1,260 - the threshold level for the $840 amount. It seems that those getting the minimum will be raised to the new level here. Also, as discussed below, it seems that these considerations will be applied to death benefits.

2. Permanent Disability Benefits.

AB 749 also provided for a dramatic increase in permanent disability. This takes two forms. First is an increase in the weekly benefit paid every year commencing January 1, 2003. Second, there is an increase in the number of weeks of some payments, making a greater overall payout. This increase was further expanded by SB 899. In cases showing greater disability, even more weeks were added on for cases with dates of injury in 2005 or afterward. Money charts are common for all of this.

3. Life Pensions.

Life pensions are governed by Labor Code Section 4659. That section lays out the rule that 1.5 percent of the average weekly earnings for each 1 percent of disability in excess of 60 percent is paid during the remainder of the applicant's life. As is well established, this is payable only after permanent disability is paid out in full, which of course greatly reduces the present value of any life pension.

AB 749 dramatically increased the value of these benefits for higher earners. For injuries occurring on or after January 1, 2006, a much higher average weekly wage of $515.38 is set as the limit for calculating these benefits. The limit before that date is $257.69.

Also, for dates of injury on or after 2003 an annual cost of living increase (COLA) applies to life pension benefits. This is, as with TD benefits, calculated based upon the state average weekly wage increase. The COLA applies only once the permanent disability payments have been paid out and the life pension begins. Therefore, in 2007, this COLA does not have to be considered for life pension cases other than those where the applicant is totally permanently disabled. The permanent disability benefits are paid out for so long before the life pension kicks in, the defense industry will not have to worry about this until 2011.

4. Total Permanent Disability.

AB 749 put into place a new provision, Labor Code Section 4659(c). This provided for a cost of living increase (COLA) for all injuries occurring after January 1, 2003, and which result in either a life pension or total permanent disability. The defense does need to concern itself with the COLA for total permanent disability cases in 2007.

Not to put to fine a point on it, there is a duty of annual recalculation and increase in TPD payments at the beginning of every new year, for case with dates of injury on or after January 1, 2003. This is tied in with the annual analysis of the California average wage as described above. It applies regardless of what the applicant's actual wage was at the time of injury. It simply exists to adjust the applicant's payments to the economic situation throughout his or her lifetime.

It is likely that there are not many 100% cases with dates of injury after January 1, 2003 that have been accepted at that level. However, for those cases which do exist, as of January 1, 2007, payment must be increased by 4.96%.

There seems to be an unanswered question here. The statute requires an increase in payment by the state wage information when the applicant becomes entitled to receive TPD. The statute also says that such increases are to commence as of January 1, 2004 and continue every January 1 thereafter. Is it safe to assume that the entitlement begins when the determination is made that there is total permanent disability? Or are the initial payments to consider the increase that would be owed from the prior year? We will probably need judicial clarification on this. Right now I think the defense should take a colorable and reasonable position. Payments should be made based upon the rate in effect at the time of the agreement regarding entitlement to TPD, and increased every January thereafter.

5. Death Benefits.

AB 749 also granted a significant increase in death benefits, which are increased depending on the number and type of dependants for injuries occurring on or after January 1, 2006. The increase is as follows.

NUMBER AND TYPE OF DEPENDANTS - BENEFITS FOR INJURIES AFTER 1/1/06

2 total, regardless of partial - $290,000

1 total, 1 or more partial - $250,000 + 4 times support to partial dependants, not to exceed a total of $290,000

1 total, 0 partial - $250,000

0 total, 1 or more partial - 8 times annual support, not to exceed $250,000

3 or more total, regardless of partial - $320,000

There are also changes to the rule that the State of California is to be paid where there are no total dependants and no partial dependants. In this situation, $250,000 is to be paid to the estate of the injured worker. This section applies to injuries occurring starting in 2004. If there are no heirs the money will be paid to the state anyway, but this new rule gives extended family a bite at the apple before the state receives money. Recent case law has challenged the idea that the state's entitlement is constitutional.

It is worth commenting that case law to date does apply Labor Code Section 4661.5 to death benefits. The statutory scheme requires that death benefits are to be paid in the same manner and at the same rate as temporary disability benefits. Thus, two years after the death caused by an industrial injury, the recipient of death benefits may seek an adjustment of continuing biweekly payments to the allowable temporary disability benefit rate in effect at that time. Therefore it seems that this benefit will be increased every year according to the new rules of temporary disability payment after January 1, 2003, regardless of the date of injury, and subject only to the average weekly wage of the injured employee. For most cases, this will simply accelerate the payout.

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