Commonwealth Court: Pension Offset Inures to Parent Company

With the passage of Act 57 of 1996, the Pennsylvania Workers’ Compensation Act was amended to provide for offsets against indemnity compensation for certain pension or severance payments as well as for “old age” Social Security payments and unemployment compensation benefits. The relevant section of the act dealing with the offsets of pension benefits is Section 204(a), which provides that “the benefits from a pension plan to the extent funded by the employer directly liable for the payment of compensation which are received by an employee shall also be credited against the amount of the” employee’s disability benefits. On Sept. 10, in the matter of Stepp v. Workers’ Compensation Appeal Board (FairPoint Communications), No. 2270 C.D. 2013, the Commonwealth Court dealt with the meaning of the phrase “the extent funded by the employer” as it pertains to a successor company in interest. Given that pension-offset situations arise in a small percentage of cases, reading Stepp will refresh the practitioner’s awareness of the general principles and should provide a valuable practice tip.

In a 2006 case, quoted in Stepp, the Commonwealth Court explained the legislative intent of Section 204(a) as “reducing the cost of workers’ compensation by allowing an employer to avoid paying duplicate benefits for the same loss of earnings.” On the same token, the legislature did not want an employer to utilize an employee’s own retirement funds to satisfy its workers’ compensation obligations. While Section 204(a) of the act authorizes the unilateral offset itself, the receipt of pension benefits is usually discovered by the injured worker’s completion of Form LIBC-756, which is the Employee’s Report of Benefits for Offsets. This form allows the employer to inquire on a semi-annual basis whether the claimant is receiving any benefits that are subject to an offset against workers’ compensation indemnity benefits, and enables the employer to take a unilateral offset simply by filing a notice of compensation benefit offset (NCBO). Should the claimant disagree with the unilateral action taken by the employer, a review petition can be filed, seeking to challenge either the amount or nature of the offset.