For those of you who are not familiar with it, the “reverse offset” is not a football play (that I’m aware of), and if the Trump administration’s proposed 2020 budget eliminates it, there will be a huge impact on employers in several states, including Ohio.
First of all, what exactly is the “reverse offset”, and why should anyone care? The “reverse offset” applies to the deduction that the Ohio Bureau of Workers’ Compensation and self-insured employers apply to temporary total disability (“TTD”) or permanent total disability (“PTD”) benefits for injured workers who are also receiving social security disability benefits. For example, under the present rate tables, while the TTD maximum weekly rate for 2019 is $950, the TTD maximum rate for an injured worker also receiving Social Security disability benefits is $633.33.
In 1965, an amendment to the Social Security Act required a reduction (or “offset”) of Social Security disability benefits for those receiving workers’ compensation, so that the combination did not exceed 80 percent of the worker’s prior earnings. Some states, however, had established reverse offset laws prior to the 1965 legislation, under which workers’ compensation payments are reduced if the worker receives Social Security disability benefits. Legislation in 1981 eliminated the states’ option to adopt reverse offset laws, but the 15 states that already had such laws in place were exempted. See Social Security Program Operations Manual System (POMS). Ohio is one of a few remaining states where employers/insurers (not the Social Security Administration) are entitled to take the reverse offset. Other “grandfathered” states include: Alaska, California, Colorado, Florida, Louisiana, Minnesota, Montana, Nevada, New Jersey, New York, North Dakota, Oregon, Washington, and Wisconsin.
Jon L. Gelman gives a very well thought out discussion of the nationwide implications of eliminating the reverse offset in this article. According to Jon, the Budget submitted to Congress anticipated a cost savings of over $217,000,000 dollars for 2010-2019 alone if the reverse offset was eliminated. In his article, Jon argues that the Trump proposal would balance the playing field for all states so costs would be equalized and no one single state could take an economic advantage by shifting cost to U.S. taxpayers in general.
While I certainly see Jon’s point, as an attorney representing employers who operate in the state of Ohio, I also have to consider the implications for my clients. As an Ohio citizen, I also have concerns about the negative impact eliminating the reverse offset would have on the Ohio Bureau of Workers’ Compensation. This could lead to increased workers’ compensation premium costs, which can in turn negatively impact the Ohio economy in general.
Just as an example, consider an injured worker who receives both Social Security Disability and TTD for one year following a complicated surgical procedure. The injured worker’s average weekly wage entitles her to the 2019 maximum TTD rate ($950). 52 weeks of TTD at the maximum rate amounts to $49,400.00. With the reduction for social security disability, 52 weeks of compensation would be $32,933.16. That’s a difference of $16,466.84 in one year, which the injured worker now receives from the federal government, but which would be paid by the Ohio BWC or self-insured employer if the reverse offset were eliminated.
As another example, consider the case of an injured worker who receives permanent total disability compensation at the maximum rate for a 2019 claim from age 32 to age 62 (at which point they switch over to social security retirement, and the offset ends). The elimination of the reverse offset in that claim would mean a difference of around $450,000.00 over the course of the claim.
At this point, elimination of the reverse offset is just one of many proposed changes to the federal budget. Nothing may ever come of it. Ohio employers and Ohio politicians need to be mindful of the issue, however. Admittedly, the reverse offset is something that tilts the scales in Ohio’s favor. But maybe Ohioans deserve a thumb on the scale for a change?