SSR 82-5: SECTION 224 (42 U.S.C. 424) DISABILITY -- REDUCTION OF BENEFITS DUE TO RECEIPT OF WORKMEN'S COMPENSATION -- TREATMENT OF CERTAIN LUMP-SUM SETTLEMENTS MADE UNDER NEW JERSEY LAW
20 CFR 404.408
- Under the conditions described in section 34:15-20 of the New Jersey statute, the State's Division of Workers' Compensation may approve a lump-sum settlement arising from a claim for compensation following an employee's accident, injury, or occupational disease. Such a settlement has "the force and effect of a dismissal of the claim petition" and is "a complete surrender of any right to compensation" under the State's workmen's compensation (WC) statutes. The New Jersey statute provides that any payments made under section 34:15-20 are to be recognized as WC benefits solely for insurance rating purposes. Held, the State's characterization of the payments is not binding on the Social Security Administration. The lump-sum settlements under section 34:15-20 of the New Jersey statute are made in lieu of periodic benefits and thus are WC benefits subject to the offset provisions of section 224 of the Social Security Act.
A question has been raised whether the lump-sum settlements discussed in section 34:15-20 of the New Jersey statute are WC benefits subject to the offset provisions of section 224 of the Social Security Act (the Act).
Section 34:15-20 of the New Jersey statute states:
- "In case of a dispute over or failure to agree upon a claim for compensation between employer and employee, or the dependents of the employee, either party may submit the claim, both as to the questions of fact, the nature and effect of the injuries, and the amount of compensation therefore according to the schedule herein provided, to the Division of Workers' Compensation, as prescribed in article 4 of this chapter (section 34:15-49 et seq.). After a petition for compensation or dependency claims has been filed, seeking compensation by the reason of accident, injury or occupational disease of any employee, and when the petitioner is represented by an attorney of the State of New Jersey, and when it shall appear that the issue or issues involve the question of jurisdiction, liability, casual relationship or dependency of the petitioner under this chapter, and the petitioner and the respondent are desirous of entering into a lump-sum settlement of the controversy, a judge of compensation may with the consent of the parties, after considering the testimony of the petitioner and other witnesses, together with any stipulation of the parties, and after such judge of compensation has determined that such settlement is fair and just under all the circumstances, enter 'an order approving settlement.' Such settlement, when so approved, notwithstanding any other provisions of this chapter, shall be final and conclusive upon the employee and the employee's dependents, and shall be complete surrender of any right to compensation or other benefits arising out of such claim under the statute. Any payments made under this section shall be recognized as payments of workers' compensation benefits for insurance rating purposes only."
Section 224(b) of the Act provides:
- "If any periodic benefit under a WC law or plan is payable on other than a monthly basis (excluding a benefit payable as a lump sum except to the extent that it is a commutation of, or a substitute for, periodic payments), the reduction under this section shall be made at such time or times and in such amounts as the Secretary finds will approximate as nearly as practicable the reduction when benefits are payable on a monthly basis."
Although the last sentence of section 34:15-20 of the New Jersey statute states that payments made under that section are to be recognized as WC benefits solely for insurance rating purposes, this characterization is not binding on SSA. In the absence of a plain indication to the contrary, it will be assumed that the application of a Federal statute is not dependent on State law. This assumption is based on the need for nationwide uniformity of application of Federal law. In addition, Federal programs may be impaired if State law was controlling. For example, in a claim brought in New York under title VII of the Civil Rights Act of 1964 (see, Popkin v. N.Y. Dept of Health and Mental Hygiene, 547 F.2d 18, 19 (2d Cir 1976)), the court applied the above rule and stated that terms used, but not defined in that Act would not be construed according to New York law because title VII does not provide that the terms of the Federal statute are to be construed according to State law.
The same result is reached in the present situation. Unlike certain provisions of the Act which specifically mandate the State law is to be controlling, section 224 of the Act makes no reference to State law. Therefore, section 34:15-20 is not controlling. Although the final sentence in section 34:15-20 of the New Jersey statute is not binding for purposes of section 224 of the Act, this does not mean that the State law is of no importance. It is the actual "nature and purposes" of the payment rather than the words used to describe it which are ultimately controlling (see Larson, The Law of Workmen's Compensation, III, § 97.34 (1973 ed)). State law is of great importance in determining the "nature and purposes" of the particular benefit payment at issue.
For example, section 34:15-20 of the New Jersey statute is contained in the "Labor and Workmen's Compensation" Title of the New Jersey Code. In the language of section 34:15-20 itself, the lump-sum settlement arises when there is a "dispute over or failure to agree upon a claim for compensation between employer and employee. . .", and compensation is being sought for "accident, injury or occupational disease." The settlement is submitted to and approved by the Division of Workers' Compensation, which has exclusive jurisdiction of all claims for worker's compensation benefits. Most importantly, section 34:15-20 settlements have "the force and effect of a dismissal of the claim petition" and are " a complete surrender of any right to compensation" under the WC statutes. Thus, the lump-sum settlements are made in lieu of periodic payments. The above evidence that these lump-sum settlements are WC benefits subject to the offset provision of section 224(a) of the Act is sufficient to counter the statement to the contrary in section 34:15-20 of the New Jersey statute.