When a Worker’s Compensation claim is settled, either by a cash payment or by a combination of cash with a Structured Settlement, the present value (or cost) of the settlement is pro-rated over the injured worker’s lifetime.
For example, take a 50 year old injured worker who receives $375 per week in compensation. The settlement totals $60,000 ($20,000 initial cash and $40,000 in a Structured Settlement that pays him $1,000 per month for 4 years). The $60,000 present value of the settlement is pro-rated over his natural life expectancy of 28 years (this is known as Normal Life Expectancy or NLE).
To determine the offset, simply do two calculations:
1) $60,000 (total settlement amount) divided by 28 years (NLE) = $2,142.86 per year.
2) $2,142.86 divided by 52 (weeks in year) = $41.21 Per Week (offset).
This offset is included on the Redemption Order. If the claimant is not receiving the maximum amount allowable from SSDI, their offset, which was $375 per week, is now only $41.21 per week. Thus, their SSDI will increase along with an added $1,000 per month from the Structured Settlement benefits. The injured worker is now in a better position than he was before since he has been given $20,000 in initial cash, his weekly SSDI offset has been lowered, and he is also receiving an additional $1,000 a month.