New Year's Benefit Changes
Saturday, December 31, 2005 | 0
As we approach the New Year there are a number of items that require attention especially in handling for post 1/1/06 injury claims. The following are discussions of what I hope are most of the items that will require attention as claims arise during the New Year:
Labor Code section 4661.5 - Two Year "Bump up" for TTD Does not apply for 2006
Traditionally this is an issue each year as Temporary Total Disability (TTD) benefits increase. These rate increases result in the need to evaluate each case for the potential impact on ongoing payments of TTD on or after the 2 year anniversary of the date of injury. This may be the last year that you will not have to consider increasing TTD at the beginning of the year on eligible claims since the Maximum TTD rate for 2006 is the same as for 2005. This is because the State Average Weekly Wage (SAWW) did not exceed the Max TTD rate for 2006.
However, beginning in 2007, the maximum TTD rate will be adjusted upward based on the increase in the SAWW for the prior year. While it is possible for the SAWW to go down (as it did for calculations effective 1/1/04), it seems unlikely for the foreseeable future. Therefore in the years beginning in 2007, we are most likely going to see annual increases in the TTD rate based on the SAWW changes. The last two years saw increases of 1.97% and 4.01% respectively. We will know by mid 2006 what the SAWW increase will be for 1/1/07 and be able to calculate the maximum and minimum rates for 2007.
Remember that when the percentage increase goes into effect next year, it will apply to TTD (but not partial TD, as Labor Code section 4661.5 does not apply to that benefit), Dependency Benefits, Supplemental VR payments made for injured workers who are still in VR on 1/1/07 and in 2007 the percentage increase will also apply to the minimum TTD which is currently $126 per week. Finally remember that Labor Code section 4661.5 benefits require that the employee have sufficient earnings to justify the increase for maximum benefits.
Life Pension/PTD - Labor Code section 4659(c) increase for PTD effective 1/1/06
While there is no increase for maximum TTD under 4661.5 for Permanent Total Disability (PTD) cases, there is an increase for some life pension and PTD cases based on the percentage increase in the SAWW of 4.01%. All injuries after 1/1/03, where the permanent disability award includes payments of a life pension under Labor Code section 4659, also require annual increases based on the percentage increase in the SAWW. This increase is a Cost of Living Adjustment (COLA) and does not require that the IW have earnings to justify the increase.
Since no permanent disability awards between 70% and 99% will be requiring payments of the life pension portion of the award for many years; this section only impacts PTD awards at present. On any award of Permanent Total Disability, for injuries after 1/1/03, increases are made based on the percentage increase in the SAWW, not in increases in the TTD rate. These increases are made on an annual basis effective January 1 after the award issues, not beginning on the 2 year anniversary of the date of injury.
Therefore if a PTD award is being paid out on a post 1/1/03 case, effective 1/1/06, the benefit rate is to be increased by 4.01%.
Examples (All assume DOI after 1/1/03):
Award on 6/1/03 for PTD with rate of $500:
Increase effective 1/1/04 = $0.00*
Increase effective 1/1/05 = $500.00 * 1.0197 = $509.85
Increase effective 1/1/06 = $509.85 * 1.0401 = $530.29
For injuries occurring prior to 1/1/03, all PTD and life pension rates are fixed as of the date of injury and there are no adjustments required.
* SAWW for 2004 decreased and since only increases are calculated, there was no adjustment on 1/1/04.
Partial Permanent Disability (PPD) Rates:
For claims with dates of injury after 1/1/06, Partial Permanent disability benefits will be calculated using higher minimum and maximum rates:
| Effective Date | PD Rating | Min Earnings | Max Earnings | Min Rate | Max Rate |
| 1/1/2006 | < 70% | $195.00 | $345.00 | $130 | $230 |
| = >70% | $195.00 | $405.00 | $130 | $270 |
Note that the rate for payment of partial permanent disability for cases at 70% and above will be at the same rate as injuries during 2005 but all the other category of benefit is increased. This is clearly done to "make us crazy" (to quote AT&B legal guru, Phil Walker) as we try to make some kind of order to providing new benefits.
Claims with dates of injury prior to 1/1/06 are not affected by any change in Partial Permanent disability rates that take effect on that date.
Life Pension Rate:
For claims with dates of injury after 1/1/06, the maximum rate used for calculation of a life pension on cases between 70% and 99% increases from $257.69 to $515.38, effectively doubling the rate for life pensions where earnings are at or equal to the new rate.
This change also means that many life pension cases may have the life pension benefit computed using less than maximum life pension calculation. Labor Code section 4453(b) provides that the payments for a life pension are not calculated using that section (which covers TD, PPD or PTD rates) but on the rates in section 4659. Labor Code section 4659 provides that for a maximum earnings level for calculation of the life pension but does not provide a minimum rate for calculation of life pensions and therefore presumably there is none. It is therefore important to make certain that calculations of life pension benefits reflect the injured worker's actual earnings, up to the new statutory maximum of $515.38.
Dependency Benefit Rates:
Dependency Benefits are also increasing dramatically for injuries on or after 1/1/06, effectively doubling the dependency benefits:
| Effective Date | Burial Expense | 0 or 1 Total Dependant | 2 Total Dependants | 3 or more Total Dependants | 1 Total plus 1 or more Partial Dependants | No Total & 1 or more Partial Dependants |
| 1/1/2006 | $5,000 | $250,000 | $290,000 | $320,000 | $250,000 plus 4X annual support not to exceed $290,000 | 8X annual support not to exceed $250,000 |
Please note, not only have the different categories of dependency benefits doubled, but for calculation of 1 or more partial dependants, the multiplier for the annual contribution of the decedent to partial dependants has also increased from 4X to 8X the annual amount of the support calculation.
Dependency benefits are paid at the same rate as TTD, are subject to Labor Code section 4661.5 increases after two years from the date of injury (if the earnings record supports such an increase) but are subject to a minimum payment rate of $224, not the TTD minimum rate of $126. The minimum rate will not be subject to adjustment until the minimum TTD rate exceeds $224 per week (an event that is not likely to occur much before 20 years from now).
Burial expense amount is unchanged.
Caveat:
As Indemnity rates rise, obtaining solid information on earnings early in the claim and documenting calculations becomes increasingly important. As maximum rates rise, the number of claims where benefits are to be paid at rates below maximum increases. Therefore greater vigilance must be paid to collecting information and analyzing date for proper payment of the different benefits. Careful attention also needs to be paid to which benefits are increase using Labor Code section 4661.5 (2 year bump up) and which are increased using Labor Code section 4659 (COLA increases). Because of the overlap in earnings calculations for TTD, Dependency and PTD benefits at both minimum and maximum levels, care must be given to using the correct methodology for increasing benefits at the correct time and in the correct amounts.
By attorney Richard "Jake" Jacobsmeyer, managing partner of the Concorde office of Adelson, Testan, Brundo & Popolardo. Jake can be reached at richardjacobsmeyer@atblaw.net.
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