WHEN CAN MY DISABILITY WAGE LOSS BENEFITS BE REDUCED OR “COORDINATED” BY OTHER BENEFITS?
There used to be a concept in the law (and there still is in many states) called “the collateral source rule.” It basically meant that if the same event caused two or more different people to become independently liable or responsible to a particular victim, the victim was entitled to receive whatever was owed to them from all of the sources. One liable party wasn’t able to get off scot free by saying that it looked like the victim already got reimbursed by somebody else. For example, under this rule, an assailant could not avoid liability for a victim’s medical bills just because the victim had previously purchased medical insurance and had his bills paid through the insurance company.
In 1982, insurance companies saved themselves a lot of money by persuading Michigan voters that the collateral source rule unfairly let victims “double dip” and get more than a full recovery for their injuries. For injuries suffered after March 31, 1982, workers’ compensation wage loss benefits,, are now coordinated–that is, reduced–if a worker receives other forms of benefits.
- Workers’ compensation benefits can be reduced by up to 50% of any old-age Social Security Benefits that a worker is receiving. Under the 2011 amendment to the statute, if an injured worker was receiving Social security retirement at the time of injury, social security retirement benefits cannot be used to reduce workers compensation by more than 50% of what is otherwise due.
- Workers’ compensation benefits are not reduced because of the receipt of Social Security Disability Benefits. This is because the Social Security Administration already reduces Social Security Disability Benefits when a worker is receiving workers’ compensation.
- Workers’ compensation benefits are reduced by 100% of any Regular MESC Unemployment Benefits that a worker is receiving. Workers’ compensation benefits are not reduced by the receipt of “subpay,” supplemental unemployment benefits. (There is litigation pending about whether additional benefits paid under the federal CARES Act during the pandemic can be coordinated.)
- Workers’ compensation benefits are reduced by the after-tax amount of payments made to the worker through a self-insurance plan, a wage continuation plan, or a disability insurance plan if the employer financed the plan in full. If both the employer and employee contributed to the cost of the disability insurance plan, workers’ compensation benefits will be reduced proportionately based on the amount funded by the employer. This means that an employer can reduce your workers’ compensation payments by what it pays out in sickness and accident benefits and regular pension benefits. Under the 2011 amendment to the Act, under certain very limited situations, workers compensation benefits can be reduced by regular pension benefits a worker is eligible for but has not actually taken, if that worker is of regular retirement age and will never be able to return to work.
- Coordination or reduction of workers’ compensation benefits did not apply to any disability pensions existing as of March 31, 1982 and did not apply to payments made under disability pension plans made before this date. Parties have been free to negotiate since 1982 whether disability pensions can be used to reduce workers’ compensation benefits.
**Sometimes workers have been paid other benefits from other insurance companies and governmental agencies during the course of their illness. It is also important to determine whether these entities need to be reimbursed. For example, Medicare and Medicaid have a statutory claim for reimbursement.
According to Michigan statute, workers injured before March 31, 1982 can not have their workers’ compensation benefits reduced through coordination.