SSR 71-15a: SECTION 224 -- DISABILITY INSURANCE BENEFITS -- REDUCTION OF BENEFITS -- COMPROMISE LUMP-SUM SETTLEMENT OF WORKMEN'S COMPENSATION PAYMENTS

20 CFR 404.408

SSR 71-15a

The claimant was injured in an industrial accident in September 1966, and

was paid temporary total workmen's compensation benefits. She became

entitled to disability insurance benefits beginning in June 1967. Her

employer and its insurer questioned the nature and extent of disability

suffered by the claimant as a result of the industrial accident. At a

conference held in May 1968 before a referee of the Division of Workmen's

Compensation, pursuant to the Revised Statutes of Missouri (1959) section

287.380, a lump-sum compromise settlement of her claim under the Missouri

Workmen's Compensation Law was reached. Notified of this settlement in

October 1968, the Social Security Administration informed the claimant

that her disability insurance benefits would be withheld from November

1968 through 1971 since she received a lumpsum workmen's compensation

payment as a substitute for periodic payments. The claimant objected to

this reduction in her benefits.

* * * * * * *

Section 404.408(d) of the Social Security Administration Regulations No.

4 (20 CFR 404.408(d)), prior to amendment in January 1970, provided that

amounts included in the workmen's compensation award which are

specifically identifiable as being for medical, legal, or related expenses

paid or incurred by the individual in connection with his workmen's

compensation claim, or the injury or occupational disease on which it is

based, are excluded in computing the reduction. As amended, the section

provides that such expenses incurred by the individual in connection with

his workmen's compensation claim, or the injury or occupational disease on

which the award or agreement is based, are excluded in computing the

reduction to the extent that they are consonant with State law

r occupational disease on which it is

based, are excluded in computing the reduction. As amended, the section

provides that such expenses incurred by the individual in connection with

his workmen's compensation claim, or the injury or occupational disease on

which the award or agreement is based, are excluded in computing the

reduction to the extent that they are consonant with State law. Such

medical, legal, or related expenses for purposes of exclusion from the

workmen's compensation award or compromise agreement may be established by

the compensation award, compromise agreement, or court order which

specifies or itemizes the amount of such expenses included in the

workmen's compensation award or agreement. In addition, amounts specified

or itemized in the workmen's compensation award or compromise agreement as

reimbursement for anticipated medical expenses are excluded from such

award or agreement in computing the reduction, but anticipated medical

expenses not so specified or itemized may not be excluded. In the event

that a compensation award, agreement, or court order does not specify the

amount of reimbursement included for the aforementioned expenses paid or

incurred, and the individual alleges such expenses were paid or incurred

by him, they may be established by a detailed statement from the

individual's attorney, physician, or the employer's insurance carrier, or

bills, receipts or cancelled checks, or other clear and convincing

evidence indicating the amount of these expenses included in the award or

compromise agreement, or any combination of the foregoing evidence from

which amounts of such expenses are determinable.

ey may be established by a detailed statement from the

individual's attorney, physician, or the employer's insurance carrier, or

bills, receipts or cancelled checks, or other clear and convincing

evidence indicating the amount of these expenses included in the award or

compromise agreement, or any combination of the foregoing evidence from

which amounts of such expenses are determinable.

The record discloses that the claimant was paid temporary total workmen's

compensation of $1,966.50 from December 19, 1966 to October 21, 1967 and

was provided medical aid amounting to $5,181.86. The compromise agreement

provides for the payment of a lump-sum settlement in the amount of $7,350

which, in addition to the amount paid previously, constitutes an aggregate

workmen's compensation payment of $9,316.50. Although the compromise

agreement allows 25% of the lump-sum payment for legal fees pursuant to

Missouri statute, no additional allocation is specified for medical

expenses paid, incurred, or anticipated in connection with the claimant's

workmen's compensation claim or the injury on which it is based.

The claimant contends that reduction under section 224 against her

disability insurance benefits should not be made because the compromise

settlement was not a commutation of, or substitute for periodic

payments.

The Revised Statutes of Missouri (1959) reads, in pertinent part of

section 287.390:

ction with the claimant's

workmen's compensation claim or the injury on which it is based.

The claimant contends that reduction under section 224 against her

disability insurance benefits should not be made because the compromise

settlement was not a commutation of, or substitute for periodic

payments.

The Revised Statutes of Missouri (1959) reads, in pertinent part of

section 287.390:

Specifically, this section of the State statute does not prevent parties

to workmen's compensation claims from making voluntary agreements in

settlement of such claims. However, such agreement of settlement or

compromise of any dispute or claim for compensation becomes valid only

when approved by a referee or a commission in accordance with the rights

of the parties established by the Missouri Workmen's Compensation law. The

appellate court of Missouri has held in Mosier v. St. Joseph Lead

Co. , 205 S.W. 2d 227 (St. Louis Ct. of App., Mo., 1947), that the

above quoted subsection of the Missouri Workmen's Compensation law

contemplates the settlement of the entire workmen's compensation claim and

the discharge of the employer's entire liability resulting from the

industrial accident. In addition, approval of such compromise settlement

by the commission or referee includes a finding that the claim was

compensable. Morgan v. Duncan , 361 Mo. 683, 236 S.W. 2d (1951).

Furthermore, lump-sum compromise settlements approved in accordance with

the Missouri Workmen's Compensation law are binding on the parties and not

subject to review by the courts. General Motors Corp. v. Holler ,

F.2d 297 (8 Cir., 1945).

romise settlement

by the commission or referee includes a finding that the claim was

compensable. Morgan v. Duncan , 361 Mo. 683, 236 S.W. 2d (1951).

Furthermore, lump-sum compromise settlements approved in accordance with

the Missouri Workmen's Compensation law are binding on the parties and not

subject to review by the courts. General Motors Corp. v. Holler ,

F.2d 297 (8 Cir., 1945).

The claimant's contention that reduction under § 224 should not be made

because the compromise settlement was not a commutation of or substitute

for periodic payments, was previously considered by the courts. In Walters v. Flemming , 185 F. Supp. 288 (D.Mass., 1960), the

plaintiff had received weekly workmen's compensation payments until a

lump-sum amount was agreed on between plaintiff and his employer's

insurance company and approved by the Massachusetts Industrial Accident

Board. The court held that this lump sum was not a commutation, but a

substitute for periodic payments to which the plaintiff would otherwise be

entitled, and hence that reduction was proper:

It is apparent that in the instant case the compromise lump-sum payment

was a substitute for periodic payments provided by the Missouri statute to

which the claimant was entitled. Accordingly, the Appeals Council held that reduction from the claimant's disability insurance

benefits is required under section 224 of the Social Security Act until

absorption of the lump sum compromise settlement has been completed, less

the legal expenses incurred by the claimant and specifically identified in

the agreement.