        IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Robert Thompson,                        :
                         Petitioner     :
                                        :
            v.                          :   No 918 C.D. 2015
                                        :   Submitted: February 5, 2016
Workers' Compensation Appeal            :
Board (City of Philadelphia),           :
                         Respondent     :


BEFORE:     HONORABLE ROBERT SIMPSON, Judge
            HONORABLE MICHAEL H. WOJCIK, Judge
            HONORABLE DAN PELLEGRINI, Senior Judge


OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE SIMPSON                        FILED: March 17, 2016

            In this petition for review, Robert Thompson (Claimant) asks whether
the Workers' Compensation Appeal Board (Board) erred in affirming a Workers'
Compensation Judge's (WCJ) decision that modified Claimant’s total disability
benefits due to pension offset. Claimant asserts the WCJ did specify an effective
date for modification of offset, and the notice of pension offset (Offset Notice)
violated Section 204(a) of the Pennsylvania Workers’ Compensation Act (Act),
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §71. The City of Philadelphia
(Employer) asserts there was no error when the Board held that the offset remains
in full force and effect regardless of an originally improperly calculated offset.
Upon review, we affirm the Board's determination.
                                  I. Background
                Claimant worked as a firefighter for Employer from 1974 through
2005. Dep. of Kenneth A. Kent, FSA, FCA, 9/24/13, Notes of Testimony at 16;
Reproduced Record (R.R.) at 38a.                Claimant received workers’ compensation
benefits for an occupational heart disease by order circulated on February 6, 2009
and retroactive to February 26, 2005. Claimant’s weekly workers’ compensation
benefit was $716.00 per week. WCJ’s Op. and Order (WCJ Decision), 5/12/14, at
1; R.R. at 96a. After the effective date for benefits, on July 28, 2005, Claimant
retired.1 City of Philadelphia, Municipal Retirement System Board of Pensions
(Board of Pensions), Pension Maintenance Screen Shot of Robert Thompson,
9/24/13 (Pension Screen Shot); R.R. at 70a.


                For years Employer paid both the full workers’ compensation benefits
and the full pension to Claimant. During this time, Employer did not seek a
pension offset.2


                However, on June 20, 2012, Employer issued its Offset Notice, stating
that effective July 9, 2012, Employer was taking a pension offset of $645.47
against Claimant’s $716 weekly workers’ compensation benefits.              The Offset
Notice stated that the pension offset was pursuant to Section 204(a) of the Act, 77
P.S. §71.3 Offset Notice at 2; R.R. at 5a.

      1
         Claimant’s gross monthly pension benefit was $3,688.41. City of Philadelphia,
Municipal Retirement System Board of Pensions (Board of Pensions), Pension Maintenance
Screen Shot of Thompson, 9/24/13; R.R. at 70a.
      2
        Employer argues that Claimant received an overpayment of $213,337.72 during this
time. Employer does not seek recoupment. See Br. for Resp’t at 9.
      3
          Section 204(a) states, in relevant part:
(Footnote continued on next page…)

                                                     2
               Rather than taking an offset from Claimant’s after-tax net pension
benefit, Employer began taking an offset against Claimant’s gross pension benefit.
See WCJ’s Op. 1-7; R.R. 94a-100a. In addition, to calculate the weekly offset,
Employer divided the monthly benefits by 4 rather than by 4.34. 4                         As a
consequence of these miscalculations, Claimant filed a petition to review pension
offset (review petition) and a penalty petition.


               The WCJ denied Claimant’s review petition but granted Claimant’s
penalty petition, finding that Employer violated the Act by failing to make the
proper calculations for the pension offset. The WCJ ordered that Employer use the
proper calculations going forward. The WCJ also awarded payment of an amount
equal to the excess offset taken, together with interest.5 Further, the WCJ imposed
the payment of an additional amount from Employer in the form of a penalty of


(continued…)


               The severance benefits paid by the employer directly liable for the
       payment of compensation and the benefits from a pension plan to the extent
       funded by the employer directly liable for the payment of compensation which are
       received by an employee shall also be credited against the amount of the award
       made under sections 108 [occupational disease] and 306 [total and partial
       disability], except for benefits payable under section 306(c) [specific loss
       benefits] ....

77 P.S. § 71(a).
       4
         Section 123.9(a) of the Bureau’s regulations, 34 Pa. Code §123.9(a), states that offsets
of amounts received from pension benefits are calculated on a weekly basis. However, Section
123.9(a) also requires that if an employee’s pension benefit is received on a monthly basis, then
the net amount contributed by the employer shall be divided by 4.34. 34 Pa. Code §123.9(a).

       5
         Employer contends the underpayment was $56.14 per week, for a total of $5,501.72.
Br. for Resp’t at 9.



                                               3
50% on the deferred amounts of compensation due and owing. WCJ’s Op. at 6-7;
R.R. at 99a-100a.


              Claimant appealed the WCJ’s decision to the Board. Employer did
not appeal the WCJ’s decision, paid the awarded penalty, paid back the deferred
workers’ compensation benefits with interest and corrected the calculations on
Claimant’s pension offset for future workers’ compensation payments. Board Op.
and Order, 5/7/15; R.R. at 81a-91a. On Claimant’s appeal, the Board affirmed.
Claimant now petitions for review to this Court.


                                    II. Issues
                                   6
              On further appeal, Claimant contends that the Board erred when it
affirmed the WCJ’s decision modifying Claimant’s total disability benefits based
on a pension offset when the WCJ did not explicitly find an effective date for the
modification and where the WCJ found the Offset Notice form as issued, violated
the Act.

                                       III. Discussion
                                       A. Contentions
              Claimant asserts that the pension offset should be stricken in its
entirety, for several reasons. First, Claimant challenges the effective date of the
Offset Notice. In particular, the Notice failed to comply with legal requirements in
several material respects, and the WCJ made no express finding as to the effective

       6
          This Court’s review is limited to determining whether the findings of fact were
supported by substantial evidence, whether an error of law was committed or whether
constitutional rights were violated. Department of Transportation v. Workers' Comp. Appeal Bd.
(Clippinger), 38 A.3d 1037 (Pa. Cmwlth. 2011).




                                              4
date. Second, because there was no amended offset notice, and the original Offset
Notice was fatally defective, there should be no effective date for any offset. Am.
Br. of Pet’r at 8.

              Claimant argues that his situation is similar to that of the claimant in
Farance v. Workers’ Comp. Appeal Bd. (Marino Brothers, Inc.), 774 A.2d 785 (Pa.
Cmwlth. 2001). Although the argument is difficult to follow, Claimant seems to
assert that in Marino Brothers, a claimant failed to file a Report of Benefits form,
which resulted in the automatic suspension of benefits.           The claimant was
precluded from receiving retroactive benefits when the form was filed later. Here,
Employer filed an Offset Notice “as meaningless as a blank page.” Am. Br. for
Pet’r. at 18-20. Like the claimant in Marino Brothers, Employer should not be
allowed to take an offset retroactively effective from the date of such a defective
form.


              Also, the Claimant analogizes his situation to claimant in Allegis
Group (Onsite) v. Workers’ Comp. Appeal Bd. (Henry), 882 A.2d 1 (Pa. Cmwlth.
2005). In that case this Court held that an employer’s failure to issue a Notice of
Ability to Return to Work precluded the employer from suspending benefits.
Consequently, Claimant in the current controversy argues that affirming the Board
would permit employers to “slap any numbers” on an offset notice, and that not
issuing a revised offset notice would be contrary to the Act and its regulatory
scheme. Am. Br. for Pet’r at 21.


              In addition, Claimant argues that strict time lines and documentation
must be followed in an offset.       See Gardner v. Workers’ Comp. Appeal Bd.



                                          5
(Genesis Health Ventures), 888 A.2d 758 (Pa. Cmwlth. 2005) (addressing timing
for an employer to obtain impairment rating).


             Employer responds that an offset is mandatory, as evidenced by the
clear language of Section 204(a) of the Act, 77 P.S. §71(a). However, Employer
did not begin taking the offset for seven years.       During that time, Claimant
received both his full workers’ compensation benefit as well as his full pension,
resulting in an overpayment of $213,337.46. Employer proved that it funded
74.893% of Claimant’s pension.

             Employer also asserts that Section 204(d) of the Act, 77 P.S. §71(d),
directs the Department of Labor and Industry to prepare the forms necessary for
the enforcement of the pension offset. In response to this directive, the Department
issues a notice of pension offset form. The form states, in pertinent part: “You
may challenge this offset by filing a Petition to Review Compensation Benefit
Offset with the … Department ….” In other words, the remedy for defects in a
notice of offset is a petition to review offset, which will correct inaccuracies, not
the voiding of the notice of offset. Employer argues what occurred here complies
with the statutory and regulatory scheme.


             Further, the employer may only take the offset as of the date of an
offset notice. See Maxim Crane Works v. Workers’ Comp. Appeal Bd. (Solano),
931 A.2d 816 (Pa. Cmwlth. 2007) (employer was only entitled to an offset as of
the date that the claimant received the form).




                                          6
                                      B. Analysis
                As noted by this Court in City of Pittsburgh, and UPMC Benefit
Mgmt. Svcs., Inc., v. Workers’ Comp. Appeal Bd. (Wright), 90 A.3d. 801, 806
(Pa. Cmwlth. 2014):

                [T]he purpose of the Section 204(a) offset is to foster cost
                containment in the workers' compensation insurance arena.
                [T]he Legislature's clear intention [in providing an offset] was
                to afford effective redress to the employer paying both
                employer-funded pension benefits and employer-funded
                workers' compensation benefits. The 1996 amendment to
                Section 204(a) of the Act [providing a pension offset] was
                aimed at preventing ... double recovery by a claimant receiving
                both a pension and workers' compensation benefits.

Id. at 806-807 (citations omitted, emphasis added); see also 7 David B. Torrey &
Andrew E. Greenberg, WORKERS' COMPENSATION LAW AND PRACTICE §12:83 (3d
ed. 2008) (“The provision for a set-off grew out of employer concerns over the
ability of employees to double-recover for wage losses during periods of
disability.”)


                An employer is not required to provide evidence of actual pension
contributions; rather, the employer may meet its burden of proving the extent to
which it funded the pension plan (and thus the extent of its offset) with actuarial
testimony. See Pa. State Univ./PMA Ins. Grp. v. Workers’ Comp. Appeal Bd.
(Hensal), 911 A.2d 225, 232 (Pa. Cmwlth. 2006) (employer may present expert
actuarial testimony to establish the extent employer funded a claimant's defined
benefit pension for purposes of offset of workers' compensation obligation).




                                            7
               Here, Employer presented actuarial testimony from Kenneth Kent.
Kent obtained information from the Board of Pensions to determine the percentage
of offset from Claimant’s pension benefits to which Employer would be entitled.7
After receiving additional information, Kent issued reports that determined offset
rates when factoring in Claimant's entry in a deferred retirement compensation
plan.8 Upon revision, the percentages were adjusted to 74.893% and 82.415%.
WCJ’s Op., Findings of Fact (F.F.) Nos. 9-11; R.R. at 98a. The WCJ accepted
Kent's testimony as credible to establish Employer's entitlement to an offset of
74.893%, excluding funding from the Commonwealth. F.F. Nos. 13-14 at 4-5;
R.R. at 97a-98a.


               As stated by the WCJ in her opinion:

               The Act does not require proof of actual contributions.
               Employer in this case presented competent, credible and
               convincing actuarial evidence to establish that [Employer] is
               entitled to an offset of at least 74.893 percent. This Judge has
               considered the testimony of Kenneth Kent, and finds his
               credentials impressive, and his opinions expressed within a
               degree of actuarial certainty. The record reveals that Mr. Kent
               engaged in a thorough investigation and applied sound actuarial
               procedures in calculating the Employer's contribution to

       7
         Kent initially created two different reports with two different percentages of Employer's
funded amount: 74.551% and 83.391%. One of the percentages took into account the funds
provided by the Commonwealth and the other excluded those funds. Kent opined that these
percentages were reached within a reasonable degree of actuarial certainty. Kent Dep., N.T. at 5-
28; R.R. at 27a-58a.
       8
         DROP is the acronym for “deferred retirement compensation (or option) plan.” Simply
stated, a DROP allows a participant in a pension plan to set an “official” retirement date for
purposes of fixing the participant's pension benefit, while allowing the participant to continue to
work for the municipality as an employee for a limited period (e.g., one to five years). See
Borough of Ellwood City v. Ellwood City Police Dep’t. Wage Policy Committee, 2 A.3d 699
(Pa. Cmwlth. 2010).



                                                8
             Claimant's pension. In assessing the Employer's contribution,
             Mr. Kent testified that when performing his analysis, he
             incorporated all relevant information that was provided to him
             by the Board of Pensions and the Claimant's own personal
             information.

F.F. No. 13; R.R. at 98a.


             The Board accepted the WCJ’s credibility findings.          The Board
determined that based on the express language in the WCJ’s May 27, 2014 order,
the corrected offset was to begin as of the date of that order. Any future benefits
were to be calculated in accordance with that order. Adjustments and penalties
protected the Claimant from miscalculations predating that order.


             The Board also rejected Claimant’s assertion that Employer was not
entitled to any offset before the WCJ’s order. Improper calculations did not
completely negate Employer’s statutory right to an offset, and the Board found
neither error of law nor prejudice to Claimant from the WCJ’s order. We agree
with the Board.


             In accordance with the mandate in Section 204(d), the Department
created forms and promulgated regulations to implement an employer's offset right
as established in Section 204(a), 77 P.S. §71(d). Thereafter, “[t]he employee may
challenge the offset by filing a petition to review offset with the Department.” 34
Pa. Code §123.5(c); (emphasis added). There is no language in the Act or in the
regulations which requires an employer forfeit its rights to offset because of errors
in a notice of offset.      Instead, a claimant is given the right to challenge the
calculations of an offset in a review proceeding. The cases relied upon by the



                                           9
Claimant do not deal with an employer’s statutory right for offset, and they do not
compel a conclusion that Employer’s Offset Notice was void ab initio.


            Here, the Claimant was paid both his full workers’ compensation
benefits without offset and his mostly Employer-funded pension for several years.
While Employer’s belated Notice of Offset contained several errors, they were
corrected by the WCJ, and Claimant was fully compensated for the temporary
overstatement of offset.    Neither the Act nor the regulations specify that
correctable inaccuracies in the Notice of Offset will render the Notice void. Doing
so here would work a further, unreasonable forfeiture upon Employer.
Accordingly, we affirm.




                                      ROBERT SIMPSON, Judge




                                        10
       IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Robert Thompson,                       :
                       Petitioner      :
                                       :
           v.                          :   No 918 C.D. 2015
                                       :
Workers' Compensation Appeal           :
Board (City of Philadelphia),          :
                         Respondent    :


                                    ORDER



           AND NOW, this 17th day of March, 2016, the order of the Workers’
Compensation Appeal Board is AFFIRMED.




                                      ROBERT SIMPSON, Judge
