HOUSE BILL No. 5310 October 23, 2001, Introduced by Rep. Birkholz and referred to the Committee on Insurance and Financial Services. A bill to amend 1969 PA 317, entitled "Worker's disability compensation act of 1969," by amending section 354 (MCL 418.354), as amended by 1987 PA 28. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 354. (1) This section is applicable when either weekly 2 or lump sum payments are made to an employee as a result of 3 liability pursuant to section 351, 361, or 835 with respect to 4 the same time period for which old-age insurance benefit payments 5 under the social security act, 42 U.S.C. 301 to 1397f; payments 6 under a self-insurance plan, a wage continuation plan, or a dis- 7 ability insurance policy provided by the employer; or pension or 8 retirement payments pursuant to a plan or program established or 9 maintained by the employer, are also received or being received 10 by the employee. Except as otherwise provided in this section, 11 the employer's obligation to pay or cause to be paid weekly 04194'01 TJS 2 1 benefits other than specific loss benefits under section 361(2) 2 and (3) shall be reduced by these amounts: 3 (a) Fifty percent of the amount of the old-age insurance 4 benefits received or being received under the social security 5 act. HOWEVER, IN NO EVENT SHALL THE WEEKLY BENEFITS PAYABLE 6 AFTER THE REDUCTION PROVIDED BY THIS SUBDIVISION BE LESS THAN 50% 7 OF THE WEEKLY BENEFITS OTHERWISE PAYABLE WITHOUT THE REDUCTION. 8 (b) The after-tax amount of the payments received or being 9 received under a self-insurance plan, a wage continuation plan, 10 or under a disability insurance policy provided by the same 11 employer from whom benefits under section 351, 361, or 835 are 12 received if the employee did not contribute directly to the plan 13 or to the payment of premiums regarding the disability insurance 14 policy. If such self-insurance plans, wage continuation plans, 15 or disability insurance policies are entitled to repayment in the 16 event of a worker's compensation benefit recovery, the carrier 17 shall satisfy such repayment out of funds the carrier has 18 received through the coordination of benefits provided for under 19 this section. Notwithstanding the provisions of this subsection, 20 attorney fees shall be paid pursuant to section 821 to the attor- 21 ney who secured the worker's compensation recovery. 22 (c) The proportional amount, based on the ratio of the 23 employer's contributions to the total insurance premiums for the 24 policy period involved, of the after-tax amount of the payments 25 received or being received by the employee pursuant to a disabil- 26 ity insurance policy provided by the same employer from whom 27 benefits under section 351, 361, or 835 are received, if the 04194'01 3 1 employee did contribute directly to the payment of premiums 2 regarding the disability insurance policy. 3 (d) The after-tax amount of the pension or retirement pay- 4 ments received or being received pursuant to a plan or program 5 established or maintained by the same employer from whom benefits 6 under section 351, 361, or 835 are received, if the employee did 7 not contribute directly to the pension or retirement plan or 8 program. Subsequent increases in a pension or retirement program 9 shall not affect the coordination of these benefits. 10 (e) The proportional amount, based on the ratio of the 11 employer's contributions to the total contributions to the plan 12 or program, of the after-tax amount of the pension or retirement 13 payments received or being received by the employee pursuant to a 14 plan or program established or maintained by the same employer 15 from whom benefits under section 351, 361, or 835 are received, 16 if the employee did contribute directly to the pension or retire- 17 ment plan or program. Subsequent increases in a pension or 18 retirement program shall not affect the coordination of these 19 benefits. 20 (f) For those employers who do not provide a pension plan, 21 the proportional amount, based on the ratio of the employer's 22 contributions to the total contributions made to a qualified 23 profit sharing plan under section 401(a) of the internal revenue 24 code or any successor to section 401(a) of the internal revenue 25 code covering a profit sharing plan which provides for the pay- 26 ment of benefits only upon retirement, disability, death, or 04194'01 4 1 other separation of employment to the extent that benefits are 2 vested under the plan. 3 (2) To satisfy any remaining obligations under section 351, 4 361, or 835, the employer shall pay or cause to be paid to the 5 employee the balance due in either weekly or lump sum payments 6 after the application of subsection (1). 7 (3) In the application of subsection (1) any credit or 8 reduction shall occur pursuant to this section and all of the 9 following: 10 (a) The bureau shall promulgate rules to provide for notifi- 11 cation by an employer or carrier to an employee of possible eli- 12 gibility for social security benefits and the requirements for 13 establishing proof of application for those benefits. 14 Notification shall be promptly mailed to the employee after the 15 date on which by reason of age the employee may be entitled to 16 social security benefits. A copy of the notification of possible 17 eligibility shall be filed with the bureau by the employer or 18 carrier. 19 (b) Within 30 days after receipt of the notification of pos- 20 sible employee eligibility the employee shall: 21 (i) Make application for social security benefits. 22 (ii) Provide the employer or carrier with proof of that 23 application. 24 (iii) Provide the employer or carrier with an authority for 25 release of information which shall be utilized by the employer or 26 carrier to obtain necessary benefit entitlement and amount 27 information from the social security administration. The 04194'01 5 1 authority for release of information shall be effective for 1 2 year. 3 (4) Failure of the employee to provide the proof of applica- 4 tion or the authority for release of information as prescribed in 5 subsection (3) shall allow the employer or carrier with the 6 approval of the bureau to discontinue the compensation benefits 7 payable to the employee under section 351, 361, or 835 until the 8 proof of application and the authority for release of information 9 is provided. Compensation benefits withheld shall be reimbursed 10 to the employee upon the providing of the required proof of 11 application, or the authority for release of information, or 12 both. 13 (5) If the employer or carrier is required to submit a new 14 authority for release of information to the social security 15 administration in order to receive information necessary to 16 comply with this section, the employee shall provide the new 17 authority for release of information within 30 days of a request 18 by the employer or carrier. Failure to provide the new authority 19 for release of information shall allow the employer or carrier 20 with the approval of the bureau to discontinue benefits until the 21 authority for release of information is provided as prescribed in 22 this subsection. Compensation benefits withheld shall be reim- 23 bursed to the employee upon the providing of the new authority 24 for release of information. 25 (6) Within 30 days after either the date of first payment of 26 compensation benefits under section 351, 361, or 835, or 30 days 27 after the date of application for any benefit under subsection 04194'01 6 1 (1)(b), (c), (d), or (e), whichever is later, the employee shall 2 provide the employer or carrier with a properly executed author- 3 ity for release of information which shall be utilized by the 4 employer or carrier to obtain necessary benefit entitlement and 5 amount information from the appropriate source. The authority 6 for release of information is effective for 1 year. Failure of 7 the employee to provide a properly executed authority for release 8 of information shall allow the employer or carrier with the 9 approval of the bureau to discontinue the compensation benefits 10 payable under section 351, 361, or 835 to the employee until the 11 authority for release of information is provided. Compensation 12 benefits withheld shall be reimbursed to the employee upon pro- 13 viding the required authority for release of information. If the 14 employer or carrier is required to submit a new authority for 15 release of information to the appropriate source in order to 16 receive information necessary to comply with this section, the 17 employee shall provide a properly executed new authority for 18 release of information within 30 days after a request by the 19 employer or carrier. Failure of the employee to provide a prop- 20 erly executed new authority for release of information shall 21 allow the employer or carrier with the approval of the bureau to 22 discontinue benefits under section 351, 361, or 835 until the 23 authority for release of information is provided as prescribed in 24 this subsection. Compensation benefits withheld shall be reim- 25 bursed to the employee upon the providing of the new authority 26 for release of information. 04194'01 7 1 (7) A credit or reduction under this section shall not occur 2 because of an increase granted by the social security 3 administration as a cost of living adjustment. 4 (8) Except as provided in subsections (4), (5), and (6), a 5 credit or reduction of benefits otherwise payable for any week 6 shall not be taken under this section until there has been a 7 determination of the benefit amount otherwise payable to the 8 employee under section 351, 361, or 835 and the employee has 9 begun receiving the benefit payments. 10 (9) Except as otherwise provided in this section, any bene- 11 fit payments under the social security act, or any fund, policy, 12 or program as specified in subsection (1) which the employee has 13 received or is receiving after March 31, 1982 and during a period 14 in which the employee was receiving unreduced compensation bene- 15 fits under section 351, 361, or 835 shall be considered to have 16 created an overpayment of compensation benefits for that period. 17 The employer or carrier shall calculate the amount of the over- 18 payment and send a notice of overpayment and a request for reim- 19 bursement to the employee. Failure by the employee to reimburse 20 the employer or carrier within 30 days after the mailing date of 21 the notice of request for reimbursement shall allow the employer 22 or carrier with the approval of the bureau to discontinue 50% of 23 future weekly compensation payments under section 351, 361 or 24 835. The compensation payments withheld shall be credited 25 against the amount of the overpayment. Payment of the appropri- 26 ate compensation benefit shall resume when the total amount of 27 the overpayment has been withheld. 04194'01 8 1 (10) The employer or carrier taking a credit or making a 2 reduction as provided in this section shall immediately report to 3 the bureau the amount of any credit or reduction, and as 4 requested by the bureau, furnish to the bureau satisfactory proof 5 of the basis for a credit or reduction. 6 (11) Disability insurance benefit payments under the social 7 security act shall be considered to be payments from funds pro- 8 vided by the employer and to be primary payments on the 9 employer's obligation under section 351, 361, or 835 as old-age 10 benefit payments under the social security act are considered 11 pursuant to this section. The coordination of social security 12 disability benefits shall commence on the date of the award cer- 13 tificate of the social security disability benefits. Any accrued 14 social security disability benefits shall not be coordinated. 15 However, social security disability insurance benefits shall only 16 be so considered if section 224 of the social security act, 42 17 U.S.C. 424a, is revised so that a reduction of social security 18 disability insurance benefits is not made because of the receipt 19 of worker's compensation benefits by the employee. 20 (12) Nothing in this section shall be considered to compel 21 an employee to apply for early federal social security old-age 22 insurance benefits or to apply for early or reduced pension or 23 retirement benefits. 24 (13) As used in this section, "after-tax amount" means the 25 gross amount of any benefit under subsection (1)(b), (1)(c), 26 (1)(d), or (1)(e) reduced by the prorated weekly amount which 27 would have been paid, if any, under the federal insurance 04194'01 9 1 contributions act, 26 U.S.C. 3101 to 3126, state income tax and 2 federal income tax, calculated on an annual basis using as the 3 number of exemptions the disabled employee's dependents plus the 4 employee, and without excess itemized deductions. In determining 5 the "after-tax amount" the tables provided for in section 313(2) 6 shall be used. The gross amount of any benefit under subsection 7 (1)(b), (1)(c), (1)(d), or (1)(e) shall be presumed to be the 8 same as the average weekly wage for purposes of the table. The 9 applicable 80% of after-tax amount as provided in the table will 10 be multiplied by 1.25 which will be conclusive for determining 11 the "after-tax amount" of benefits under subsection (1)(b), 12 (1)(c), (1)(d), or (1)(e). 13 (14) This section does not apply to any payments received or 14 to be received under a disability pension plan provided by the 15 same employer which plan is in existence on March 31, 1982. Any 16 disability pension plan entered into or renewed after March 31, 17 1982 may provide that the payments under that disability pension 18 plan provided by the employer shall not be coordinated pursuant 19 to this section. 20 (15) With respect to volunteer fire fighters, volunteer 21 safety patrol officers, volunteer civil defense workers, and vol- 22 unteer ambulance drivers and attendants who are considered 23 employees for purposes of this act pursuant to section 161(1)(a), 24 the reduction of weekly benefits provided for disability insur- 25 ance payments under subsection (1)(b) and (c) and subsection (11) 26 may be waived by the employer. An employer that is not a 27 self-insurer may make the waiver provided for under this 04194'01 10 1 subsection only at the time a worker's compensation insurance 2 policy is entered into or renewed. 3 (16) This section shall not apply to payments made to an 4 employee as a result of liability pursuant to section 361(2) and 5 (3) for the specific loss period set forth therein. It is the 6 intent of the legislature that, because benefits under section 7 361(2) and (3) are benefits which recognize human factors sub- 8 stantially in addition to the wage loss concept, coordination of 9 benefits should not apply to such benefits. 10 (17) The decision of the Michigan Supreme Court in Franks v 11 White Pine Copper Division, 422 Mich 636 (1985) is declared to 12 have been erroneously rendered insofar as it interprets this sec- 13 tion, it having been and being the legislative intention not to 14 coordinate payments under this section resulting from liability 15 pursuant to section 351, 361, or 835 for personal injuries occur- 16 ring before March 31, 1982. It is the purpose of this amendatory 17 act to so affirm. This remedial and curative amendment shall be 18 liberally construed to effectuate this purpose. 19 (18) This section applies only to payments resulting from 20 liability pursuant to section 351, 361, or 835 for personal inju- 21 ries occurring on or after March 31, 1982. Any payments made to 22 an employee resulting from liability pursuant to section 351, 23 361, or 835 for a personal injury occurring before March 31, 1982 24 that have not been coordinated under this section as of the 25 effective date of this subsection shall not be coordinated, shall 26 not be considered to have created an overpayment of compensation 04194'01 11 1 benefits, and shall not be subject to reimbursement to the 2 employer or carrier. 3 (19) Notwithstanding any other section of this act, any pay- 4 ments made to an employee resulting from liability pursuant to 5 section 351, 361, or 835 for a personal injury occurring before 6 March 31, 1982 that have been coordinated before the effective 7 date of this subsection shall be considered to be an underpayment 8 of compensation benefits, and the amounts withheld pursuant to 9 coordination shall be reimbursed with interest, within 60 days of 10 the effective date of this subsection, to the employee by the 11 employer or carrier. 12 (20) Notwithstanding any other section of this act, any 13 employee who has paid an employer or carrier money alleged by the 14 employer or carrier to be owed the employer or carrier because 15 that employee's benefits had not been coordinated under this sec- 16 tion and whose date of personal injury was before March 31, 1982 17 shall be reimbursed with interest, within 60 days of the effec- 18 tive date of this subsection, that money by the employer or 19 carrier. 20 (21) If any portion of this section is subsequently found to 21 be unconstitutional or in violation of applicable law, it shall 22 not affect the validity of the remainder of this section. 04194'01 Final page. 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