Structured Settlements Workers' Compensation Structured Settlements 2 — Questions and Answers
Question 1: What is 'indemnity' in a workers' compensation context?
- Medical expense reimbursement
- Wage replacement payments made to an injured worker who cannot work due to the work-related injury (Correct answer)
- A lump-sum payment for permanent disfigurement
- The insurer's right to sue a negligent third party
Correct answer: Wage replacement payments made to an injured worker who cannot work due to the work-related injury
Indemnity benefits in workers' compensation replace a portion of the worker's lost wages during periods of temporary or permanent disability.
Question 2: What is 'vocational rehabilitation' and why might it be included in a workers' comp structured settlement?
- A type of therapy for psychological injuries
- Services that help an injured worker retrain for a new occupation, sometimes funded within the settlement to promote return to employment (Correct answer)
- A legal process to challenge a workers' comp denial
- An annuity product designed for injured workers
Correct answer: Services that help an injured worker retrain for a new occupation, sometimes funded within the settlement to promote return to employment
Vocational rehabilitation funding helps an injured worker who cannot return to their prior occupation acquire new skills, and including it in a structured settlement can support long-term financial independence.
Question 3: What is the 'second injury fund' in workers' compensation?
- A federal fund that reimburses employers for catastrophic claims
- A state fund that reimburses employers or insurers when a worker's prior disability combines with a new injury to cause a greater total disability than the new injury alone would have (Correct answer)
- A supplemental annuity for workers who suffer a second on-the-job injury
- A savings fund maintained by the employer for self-insured WC claims
Correct answer: A state fund that reimburses employers or insurers when a worker's prior disability combines with a new injury to cause a greater total disability than the new injury alone would have
Second injury funds encourage employers to hire workers with pre-existing disabilities by reimbursing the employer or insurer for the portion of disability attributable to the prior condition.
Question 4: What does 'permanent total disability' (PTD) mean in workers' compensation?
- A temporary condition that may improve with treatment
- A permanent condition in which the worker is completely unable to engage in any gainful employment (Correct answer)
- A disability lasting more than 30 days
- A disability affecting only one body part
Correct answer: A permanent condition in which the worker is completely unable to engage in any gainful employment
PTD means the injured worker has a permanent condition that prevents them from performing any type of gainful work, typically resulting in lifetime indemnity benefits.
Question 5: How does the structuring of workers' comp indemnity payments affect the claimant's Social Security Disability Insurance (SSDI) benefits?
- Workers' comp structured payments have no effect on SSDI
- Workers' comp payments, including structured ones, can reduce SSDI benefits under the workers' compensation offset provision until the claimant reaches retirement age (Correct answer)
- Structured WC payments permanently eliminate SSDI eligibility
- SSDI benefits automatically increase when WC structured payments begin
Correct answer: Workers' comp payments, including structured ones, can reduce SSDI benefits under the workers' compensation offset provision until the claimant reaches retirement age
Under the Social Security offset rule, combined WC and SSDI benefits cannot exceed 80% of the worker's average current earnings, so WC structured payments can reduce the SSDI benefit.
Question 6: What is a 'compromise and release' (C&R) settlement in workers' compensation?
- A court order compelling the employer to pay WC benefits
- A final settlement agreement in which the worker accepts a lump sum (or structured payments) in exchange for releasing all future WC claims (Correct answer)
- A regulatory requirement for employers to post WC insurance
- A release of the insurer from annuity obligations
Correct answer: A final settlement agreement in which the worker accepts a lump sum (or structured payments) in exchange for releasing all future WC claims
A C&R is a final settlement that closes out all aspects of the WC claim — indemnity and medical — in exchange for an agreed amount, which can be structured as periodic payments.
Structured Settlements Workers' Compensation Structured Settlements 2
What is 'indemnity' in a workers' compensation context?