Transcription
Department of LaborOWCPDefense Base Act/War Hazards Compensation Act SeminarFebruary 23, 2006Settlements and CommutationsMiranda Chiu
Settlements and Commutations1. Concludinga Claim by Settlement – theBasics2. Settlements Involving Foreign National3. Commutations – the Basics4. Difference Between Settlement andCommutation
Section 8(i) SettlementReferences1. 33 U.S.C.908(i)(1) – (4),http://www.dol.gov/owcp/dlhwc/lhwca.htm#908.2. 20 CFR702.241 – 243,http://www.dol.gov/dol/cfr/Title 20/Chapter VI.htm.3. Longshore Procedure Manual, Chapter .htm.4. OALJ Judges’ Bench Book, Topic CES/REFERENCE WORKS/2002 LHWCA TOPIC 810.HTM.
Settlement Basics Criteria for approval: settlement must be adequateand not obtained under duress. See 33 USC8(i)(1) and 20 CFR 702.243(f).May include compensation or medical benefit orboth.Settlements are limited to claims then in existence.Settlement application must be a stand-alonedocument and contain the information set out in20 CFR 702.242(b).
Settlement BasicsContinued Settlements are final and not subject to change 30days after the Order is filed.Structured settlements are permitted.The lump sum payment must be paid (received bythe claimant) within 10 days of the filing of theOrder Approving Settlement.Late payments are subject to an additional 20%compensation per 14(f) of the LHWCA.
CommutationsReferences The Defense Base Act, at 42 USChttp://www.dol.gov/owcp/dlhwc/dba.htm.1652 (b), the Secretary of Labor may, at his option or upon theapplication of the insurance carrier shall, commute allfuture installments of compensation to be paid to themone-half of the commuted amount of such futureinstallments of compensation as determined by theSecretary.
CommutationsReferences, cont’d Federal Code of Regulations, 20 CFR 702.142,http://www.dol.gov/dol/cfr/Title 20/ChapterVI.htm.Longshore Procedure Manual, Chapter htm.
Commutation Basics Only permanent disability (partial or total) and deathbenefits may be commuted.Only benefits payable to aliens and non-nationals of theU.S. not residing in the U.S. or Canada may be commuted.Only future installments of compensation may becommuted, not benefits already accrued.Medical benefits may not be commuted.
Commutation BasicsContinued The commutation must be based on acompensation order that has fixed the right of thebeneficiaries to compensation.The claimant does not have the option to reject acommuted sum in lieu of a continuing award.
Calculation of commuted payments1.To determine the beneficiary’s life expectancy, use theU.S. Life Tables published by the National Center forHealth Statistics, available s/life/1966.htm.2.If the beneficiary is a minor, use the number of yearsuntil the 18th birthday.3.To determine the present value discount rate, use the USTreasury one year constant maturity rate, published bythe Federal Reserve nt/h15.htm.
Calculation of commuted paymentscontinued4.For PTD and death benefits, determine the current percentage ofincrease of the NAWW used to calculate 10(f) adjustments underthe LHWCA. t this rate from the Treasury one year constant maturity rateto arrive at the commutation discount rate.5.Determine the present value of future compensation using the abovesteps. Divide the sum by 2, to arrive at the commuted payment.6.If there are multiple beneficiaries, the commuted payment must beseparately calculated for each beneficiary.
Settlement vs. CommutationSettlement Settlement is acompromise to resolve aclaim with bona fidedisputes of entitlement,which if fully litigated,may result in theclaimant taking less thanthe settlement sum.Commutation Commutation is usedwhen there are noentitlement issues andthe benefits payable arebased on the maximumallowed by statute.
Settlement vs. CommutationcontinuedSettlement Medical benefits may besettled. Settlements may bestructured, with futurepayments made atspecified intervals. Settlements may beapproved by the DistrictDirector or theAdministrative Law Judge.Commutation Medical benefits may notbe commuted. Commuted payment mustbe made in one lump sum. Commutations may onlybe approved by the DistrictDirector.
Settlement vs. CommutationcontinuedSettlement Settlements may not befurther reduced bycommutation. Settlements arereimbursable under theWHCA.Commutation Compensation awardsare reduced by 50%when commuted. Commutations arereimbursable under theWHCA.
Settlement and CommutationFor Foreign Nationals Language and cultural barriers.Adequacy of settlement – proving entitlement andadequacy.Documentation of earnings, extent of disability,relationship of survivors in death claims, financialsupport in dependency claims.“Under duress”.Benefit delivery mechanism.
Settlements are final and not subject to change 30 days after the Order is filed. Structured settlements are permitted. The lump sum payment must be paid (received by the claimant) within 10 days of the filing of the Order Approving Settlement. Late payments are subject to an additional 20% compensation per 14(f) of the LHWCA.
