Commutations the WorkCompCentral Way - Easy!

Sunday, February 29, 2004 | 0

Commutations of future weekly permanent disability indemnity payments is permitted by Labor Code section 5100. The methodology for calculating commutations is governed by Regulation section 10169 and the specific algorithms in the Disability Rating Manual.

Workcompcentral.com has had a commutation calculator available for some time that takes much of the difficult math out of the calculation process, yet questions still arise. This article will address the proper calculation of commuted values using the workcompcentral.com commutation calculator.

First, you must arm yourself with all of the necessary, relevant data to input into the calculator. You will need the following information: date of injury, date that PD commenced, date that the commutation check will be issued, the permanent disability rating, the weekly indemnity rate, the amount to be commuted, and the gross total of all advances made since the date PD commenced.

The most common commutation, by far, is a commutation from the far end of the award. This method provides a lump sum payment to the injured worker (or his attorney if it is to pay attorneys fees) and maintains the weekly indemnity rate for the balance of the payment award. This is Computation 2 on the workcompcentral.com commutation calculator.

Computation 1 will commute all remaining indemnity (and thus the amount to be commuted is an unnecessary data item).

Computation 3 will adjust the weekly indemnity rate, maintaining the original schedule of payments.

Input all necessary data in the commutation calculator where indicated. A critical data component is the gross total of all permanent disability indemnity made since the date of commencement of PD. This information goes into the optional field in red lettering, "0ptional - If PD Was Paid in Broken Periods - Enter Total Amount of Payments Prior to DOC (Computation 2 only):". Failure to input this data will result in an incorrect calculation, or may return a data error if it is determined that there is insufficient money left in the balance of the Award to make a commutation.

Lets use the following data as an example: DOI = 2/9/01; PD commenced 6/11/03; date of commutation = 3/1/04; PD rating 58%; weekly indemnity rate = $170; amount to be commuted = $5400; total PD advanced to date = $2308.

The calculator returns the following values:

Present value (in weeks) of amount to be commuted:

Present value of weeks remaining after commutation off far end:

Weeks of PD remaining after commutation off far end:

Amount of PD due after commutation off far end:

Number of weeks of PD eliminated from the far end:

Amount of future benefits commuted:

Interest owed carrier (i.e. savings to carrier):

Amount to pay claimant to bring commutation to even weeks:

Weeks of PD remaining after payment to bring weeks even:

If you get a screen after inputting data that says, "An error was generated by the data you have entered," the likelihood is that there is not enough money left over in the award to afford a commutation. Double check your numbers by determining how many weeks are available in the original award (use the PD Indemnity Calculator for this) and be sure that all required data has been entered accurately. If all else fails, call workcompcentral technical support at 805-484-0333. Comments Related Articles