GARY EKDAHL, Employee, v. INDEPENDENT SCH. DIST. #213, SELF- INSURED/RIVERPORT INS. SERVS., Employer/Appellant.

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1 GARY EKDAHL, Employee, v. INDEPENDENT SCH. DIST. #213, SELF- INSURED/RIVERPORT INS. SERVS., Employer/Appellant. HEADNOTES WORKERS COMPENSATION COURT OF APPEALS DECEMBER 24, 2013 No. WC CREDITS & OFFSETS - PUBLIC EMPLOYEE RETIREMENT BENEFITS. The employee, a retired public school teacher, was found to be permanently and totally disabled effective November 15, He began receiving a Teachers Retirement Association service-based retirement annuity in June Pursuant to Minn. Stat , subd. 4, after a total of $25,000 in weekly compensation has been paid, the self-insured employer is entitled to reduce the employee s permanent total disability benefits by the amount of retirement benefits then being paid to the employee through the Teachers Retirement Association. Reversed. Determined by: Cervantes, J., Milun, C.J., and Hall, J. Compensation Judge: Penny D. Johnson Attorneys: DeAnna M. McCashin, Schoep & McCashin, Chtd., Alexandria, MN, for the Respondent. Timothy P. Jung and David M. Bateson, Lind, Jensen, Sullivan & Peterson, Minneapolis, MN, for the Appellant. MANUEL J. CERVANTES, Judge OPINION The self-insured employer appeals from the compensation judge s determination that after a total of $25,000 in weekly compensation has been paid, the employer may not reduce the employee s permanent total disability benefits by the amount of retirement benefits being paid to the employee through the Teachers Retirement Association. [1] We reverse. BACKGROUND The employee began working as a public school industrial arts teacher in In 1983, he was hired by the Osakis Independent School District #213. Beginning in 1984 or 1985, the employee also coached volleyball for the school district on a seasonal basis. In addition, the employee had

2 a snow plowing business, worked as an auctioneer, and owned and maintained three residential rental properties. The employee s date-of-injury average weekly wage was $ On September 9, 2004, the employee sustained an admitted work injury to his low back. He underwent extensive conservative treatment, but his symptoms worsened. In April 2006, he underwent low back surgery and was off work for approximately four weeks. The employee continued to experience low back symptoms despite the surgery, developing right leg weakness and foot drop. The employee briefly returned to work in May, finishing the 2006 school year. However, due to his work-related condition, the employee was no longer able to perform his industrial arts teaching duties and notified the employer that he was retiring from his teaching position. The employee resigned from his teaching job with the employer effective June 1, Following his retirement from teaching, the employee obtained work as a seasonal volleyball coach with the Brandon-Evansville School District. He resigned this position after the 2011 season as he was no longer able to perform his coaching duties. He sold the snow plowing business in the spring of 2011 and did not work as a paid auctioneer after about By 2011, the employee owned just one rental property, for which he performed minimal maintenance. Medically, the employee s condition progressively deteriorated, and by late 2011, the employee had constant pain in his low back, right hip, and right knee, along with right foot drop and leg weakness causing him to limp. The employee applied for a Teachers Retirement Act (TRA) accelerated retirement annuity in March The retirement annuity began accruing as of June 16, 2006, when he was 59 years old. [2] The employee selected a plan that accelerated payments to age 62 so that he would receive a larger benefit initially and a reduced benefit beginning at age 62. [3] He also selected an annuity that provided a 100% survivor benefit. From July 2006 through April 2009, the employee received $2, per month with annual increases. In April 2009, the employee began receiving his regular benefit amount of $1, per month. The employee s current monthly TRA benefit is $1, The employee was sixty-six years old at the time of the hearing. He has not applied for Social Security benefits, choosing to wait until age 68 to increase the amount of Social Security retirement benefits he will receive. [4] The employee filed a claim petition on June 26, 2012, seeking wage loss benefits. Following a hearing, the compensation judge found the employee was permanently and totally disabled as of November 15, There has been no appeal from this finding. The judge further held that the self-insured employer may not reduce the employee s permanent total disability benefits by the amount of retirement benefits paid to the employee through the TRA pursuant to the offset provisions of Minn. Stat , subd. 4. The self-insured employer appeals from this determination. STANDARD OF REVIEW [A] decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which [the Workers Compensation Court of Appeals] may consider de novo. Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993).

3 DECISION Minnesota Statutes , subd. 4, provides, in part, that after a total of $25,000 of [permanent total disability] compensation has been paid, the amount of the weekly compensation benefits being paid by the employer shall be reduced by the amount of any disability benefits being paid by any government disability benefit program... This reduction shall also apply to any old age and survivor insurance benefits. (Emphasis added.) The employee asserts that TRA disability benefits or Social Security old age and survivor benefits only may be offset from permanent total disability benefits and that nothing in the language of subdivision 4 allows an employer and insurer to reduce permanent total disability benefits by retirement benefits. We disagree. This court has long interpreted the language of [subdivision 4] to require the offset from permanent total disability payments not only of federal social security retirement benefits, but also of a variety of state and local government retirement benefits. Adamski v. Kenneth Setterholm s Farm, 58 W.C.D. 119, 121 (W.C.C.A. 1998). This issue was first considered in Kramer v. City of St. Paul, 33 W.C.D. 425 (W.C.C.A. 1981). The employee was receiving a Public Employee Retirement Association (PERA) retirement pension [5] based on his years of service and age. [6] This court held the language any old age... benefits includes public employee retirement pensions. The court specifically rejected the employee s contention that the offset applies only to Social Security old age benefits. The issue was again addressed in Wicks v. City of South St. Paul, slip op. (W.C.C.A. Nov. 18, 1988). This court held the compensation judge properly relied upon Kramer in holding the employee s PERA retirement benefits should be applied to reduce his permanent total disability benefits. In Boll v. State, Dep t of Pub. Safety, slip op. (W.C.C.A. Feb. 3, 1995), the self-insured employer claimed an offset against permanent total disability benefits based on the employee s receipt of a Minnesota State Patrol retirement pension. While not directly deciding the issue, the court noted that in two previous cases, Kramer and Wicks, the court had held the language this reduction shall also apply to any old age and survivor insurance benefits includes public pension retirement benefits. Compare also Ruter v. State, Dep t of Corrections, 63 W.C.D. 291, 301 (W.C.C.A. 2003); Ruter v. State, Dep t of Corrections, 57 W.C.D , n.2 (W.C.C.A. 1997). In discussing coordination of workers compensation benefits with other wage-loss benefits, Larson observes that most social [insurance] legislation in the United States has appeared in unrelated fragments. 9 Lex K. & Arthur Larson, Larson s Workers Compensation Law, Scope (Rev. Ed. 2013). In Minnesota, public employee retirement and disability pensions preceded the federal Social Security system. The Teachers Insurance and Retirement Fund was initially created by the legislature in A more comprehensive act, the Teachers Retirement Act, was passed in The State Employees Retirement Association, now MSRS, was legislatively created in 1929, and PERA was created in [7] The Social Security Act was enacted in 1935 to provide old age insurance benefits and was expanded in 1939 to include survivors and dependents benefits. [8]

4 As part of a substantial revision and recodification of the workers compensation act in 1953, the Minnesota legislature enacted the initial offset provision which provided: [9] [I]f the employee is eligible for old age and survivors insurance benefits, such benefits shall be credited on the compensation benefits payable under this subdivision after a total of $18,000 [in permanent total disability benefits] has been paid. In 1956, disability benefits were added to the Social Security Act. [10] In Telle v. Northfield Iron Co., 278 Minn. 129, 153 N.W.2d 270, 24 W.C.D. 300 (1967), the Minnesota Supreme Court held the statutory offset language limited the credit against permanent total disability benefits to old age and survivor benefits, and did not include federal Social Security Act disability benefits, which the employee began receiving in The employee had been eligible for federal old age benefits since his 62nd birthday in 1964, but elected not to apply for them. The court further held the credit could be taken as soon as the employee was eligible for Social Security old age benefits, whether he received retirement benefits or not. Following Telle, in 1967, the legislature amended the offset language to provide: the amount of the [permanent total disability] compensation being paid to the employee shall be reduced by the amount of any disability benefits being paid by any government disability benefit program... This reduction shall also apply to any old age and survivor benefits. (Emphasis added.) It can certainly be concluded, as this court did in Kramer, that by adding the word any in front of the reference to old age and survivor insurance benefits, the legislature intended to clarify that all government old age (retirement) benefits are included in the offset. Cf. Parson v. Holman Erection Co., Inc., 428 N.W.2d 72, 41 W.C.D. 129 (1988) ( We must assume that the legislature intended its new changed language to mean something different than the language of the old statute. ) While the Minnesota Supreme Court has not addressed this issue directly, in Potucek v. City of Warren, 535 N.W.2d 333, 336, 53 W.C.D. 88, 91 (Minn. 1995), [11] the court observed that In recognition that workers compensation is but one element of a system of wage loss protection, the Minnesota legislature early on provided a means for coordinating workers compensation with the federal social security system and the state pension system. (Emphasis added.) As explained in Larson: Wage loss legislation is designed to restore to the worker a portion... of wages lost to the three major causes of wage-loss: physical disability, economic unemployment, and old age. The crucial operative fact is that of wage loss; the cause of the wage loss merely dictates the category of legislation applicable. Now if a worker undergoes a period of wage loss due to all three conditions, it does not follow that he or she should receive three sets of benefits simultaneously

5 and thereby recover more than his or her actual wage. The worker is experiencing only one wage loss and, in any logical system, should receive only one wage-loss benefit. This conclusion is inevitable, once it is recognized that workers compensation, unemployment compensation... and old age and survivors insurance are all parts of a system based upon a common principle. Larson s Workers Compensation Law, ; cited in Sundby v. City of St. Peter, 693 N.W.2d 206, W.C.D. 137, (Minn. 2004); Jones v. Metropolitan Waste Control Comm n, 42 W.C.D. 268, (W.C.C.A. 1989), summarily aff d (Minn. Sept. 28, 1989); see also Ruter v. State, Dep t of Corrections, 569 N.W.2d 407, 408, 57 W.C.D. 129, 131 (Minn. 1997) (our compensation plan is based upon the notion that for a single wage loss, there should be only one wage-loss benefit); Boll v. State, Dep t of Pub. Safety, slip op. (W.C.C.A. Feb. 3, 1995). [12] The employee maintains it is unfair, and unconstitutional, [13] to reduce the permanent total disability benefits of a public employee, but not the benefits of those receiving a private retirement pension. The terms of a public employee pension plan are memorialized in, and governed, by statute, unlike those of a pension provided through a private employer which is governed by the terms of the pension contract. See, e.g., Cole v. Armour & Co., 257 N.W.2d 381, 30 W.C.D. 40 (Minn. 1977). Thus, it is possible for an injured employee in the public sector to be subject to a different or even opposite offset than an employee in the private sector to accomplish the same goal, that is, coordination of wage loss benefits. While the employee raises an important and significant concern, the claim is essentially an equal protection challenge which is outside of our jurisdiction. Weber v. City of Inver Grove Heights, 461 N.W.2d 918, 43 W.C.D. 471 (Minn. 1990); compare, e.g., Ruter 569 N.W.2d at 408, 57 W.C.D. at 131 (citing Lindell v. Oak Park Coop. Creamery, 369 N.W.2d 505, 507, 37 W.C.D. 735, 738 (Minn. 1985)); cf., Schatz v. Interfaith Care Ctr., 811 N.W.2d 643, 72 W.C.D. 143 (Minn. 2012). The employer and insurer argue that Minn. R defines government disability benefits, as contemplated in Minn. Stat , subd. 4, to include old age benefits and public employee retirement benefits. The rule was promulgated by the Department of Labor and Industry pursuant to authority granted by Minn. Stat which provided for supplementary benefits. The purpose of the rule was to specify the procedure by which an employer could obtain an administrative finding of permanent total disability in order to obtain reimbursement of supplementary benefits. Minn. Stat was repealed, effective October 1, We conclude the rule has no force and effect for injuries occurring after the repeal of the statute. The employee, nonetheless, asserts that the cases allowing an offset against permanent total benefits for public employee retirement benefits occurred prior to the repeal, and that the repeal of supplementary benefits resulted in a significant impact on the income of injured workers, and these cases are, therefore, distinguishable. We disagree. The offset provision, originally enacted in 1953 and amended in 1967, existed prior to the enactment of Minn. Stat , effective January 1, At the time of its repeal, supplementary benefits were available to an employee whose adjusted compensation rate was less than 65 percent of the statewide average weekly wage, or whose compensation rate fell

6 below 65 percent because of reductions resulting from the simultaneous receipt of old age or disability benefits. Minn. Stat , subd. 2 (1994). Supplementary benefits could potentially increase injured workers benefits in essentially two ways: (1) by raising compensation levels for workers earning low wages at the time of injury and who had a low compensation rate, and (2) by increasing compensation for those whose benefits were reduced by simultaneous receipt of government old age or disability benefits. The net result to workers in this second group was receipt of permanent total disability benefits at the supplementary benefit level, plus their retirement or disability pension. See Flower v. Metropolitan Council, 61 W.C.D. 358, (W.C.C.A. 2001). Moreover, in addition to the repeal of supplementary benefits in 1995, the legislature also amended the minimum weekly compensation rate for permanent total disability benefits, increasing the minimum from 20 percent to 65 percent of the statewide average weekly wage. In Shelton v. National Painting & Sandblasting, 627 N.W.2d 324, 330, 61 W.C.D. 255, 264 (Minn. 2001), the supreme court observed that It is important to note that 65 percent of the statewide average weekly wage is indeed a minimum - but it is an aggregate of benefits paid under the compensation laws and other government disability benefit programs.... So while PTD benefits may be offset below the base compensation level of 65 percent of the statewide average weekly wage after $25,000 in PTD benefits have been paid, the benefits received by a PTD employee will not fall below that level. (Emphasis added.) Similarly, while the employee s workers compensation benefits may be reduced by the amount of his retirement pension, he retains 100 percent of the pension to which the employee and his government employer(s) contributed. The net effect is that the injured employee receives permanent total disability benefits, without reduction, until $25,000 in compensation has been paid, while receiving his full retirement pension. Once the threshold has been reached, the employee in this case will continue to receive a reduced amount of permanent total disability benefits in addition to his retirement pension. It is well to recall that the current offset provision has been in effect for 46 years and this court s interpretation has stood for more than 30 years. As the supreme court has stated on more than one occasion, [i]t is for the legislature, not the [c]ourt[s], to judge the social utility of this statutory system, which has no common law counterpart, to balance the interests of employees and employers, and to make whatever adjustments and corrections it deems appropriate. Parson, 428 N.W.2d at 76. [14] We, accordingly, reverse the decision of the compensation judge, and hold that after a total of $25,000 in weekly compensation has been paid, the self-insured employer is entitled to reduce the employee s permanent total disability benefits by the amount of retirement benefits then being paid to the employee through the Teachers Retirement Association.

7 [1] Teachers Retirement Act, Minn. Stat See, generally Minnesota Statutes, ch. 352 to 356B (2013) (Minnesota public employee pension plans). [2] For pension purposes, the employee had satisfied the Rule of 90, - - that is, the employee s age combined with his years of service equaled the sum of 90 or more - - entitling him to full retirement benefits. [3] Minn. Stat Optional accelerated retirement annuity before normal retirement age. Subd. 2. Election of accelerated annuity. * * * (a) Any coordinated member who retires before normal retirement age may elect to receive an optional accelerated retirement annuity from the association which provides for different annuity amounts over different periods of retirement. The optional accelerated retirement annuity must take the form of an annuity payable for the period before the member attains age 65, or normal retirement age, in a greater amount than the amount of the annuity calculated under section on the basis of the age of the member at retirement, but the optional accelerated retirement annuity must be the actuarial equivalent of the member's annuity computed on the basis of the member's age at retirement. The greater amount must be paid until the retiree reaches age 65, or normal retirement age, and at that time the payment from the association must be reduced. For each year the retiree is under age 65, or normal retirement age, up to five percent of the total life annuity required reserves may be used to accelerate the optional retirement annuity under this section. (b) Members who retire before age 62 may elect to have the annuity under this subdivision accelerated to age 62 rather than normal retirement age or age 65. [4] We note the law in effect on the date of the employee s injury states that [p]ermanent total disability benefits shall cease at age 67 because the employee is presumed retired from the labor market. Minn. Stat , subd. 4; Minn. Laws 1995, ch. 231, art. 1, 21 (effective October 1, 1995). [5] PERA Police Officer and Firefighter Fund, Minn. Stat [6] TRA retirement benefits, like PERA, MSRS (Minnesota State Retirement System), and other public employee retirement pensions, as well as Social Security retirement (old age) benefits, are based on a specified number of years of employment or service plus age, usually 65 or other specified retirement age. [7] Minn. Laws 1915, ch. 199; Minn. Laws 1931, ch. 406 (TRA); Minn. Laws 1929, ch. 191 (MSRS); Minn. Laws 1931, ch. 307 (PERA). See Social Security Act of 1935, 49 Stat. 620 (1935); Social Security Act Amendments of 1939, 53 Stat (1939).

8 [8] The Minnesota Workers Compensation Act, providing wage replacement benefits for injured workers, was first enacted in 1913 and substantially revised in Minn. Laws 1913, ch. 467; Minn. Laws 1921, ch. 82. Unemployment compensation was also adopted during this period, in 1936, to provide unemployed workers temporary wage replacement benefits and assistance obtaining reemployment. Minn. Laws 1936, Ex.Sess. ch. 2. [9] See Minn. Laws 1953, ch [10] Social Security Amendments of 1956, Pub. L. No PERA and MSRS, as originally enacted, included disability pension benefits. Disability benefits were added to the TRA in [11] The employee in Potucek had applied for and was being paid PERA disability benefits in the form of a joint and survivor annuity, resulting in a reduced monthly benefit to the employee, with benefits payable to a named survivor upon the employee s death. The sole issue in the case was how to calculate the offset, that is, whether the offset amount should be based on the actuarial value of the annuity or include only the benefits actually paid to the employee. The court held that compensation being paid refers to the amount actually received by the employee, citing Larson to the effect that offsets are to be confined to the exact recipient specified; thus, an offset applicable by statute to an employee will not reduce benefits to his widow. 4 A. Larson, The Law of Workmen s Compensation (1995) (now 9 Larson s [1][c]). [12] The employee argues the purpose of the offset provision is to prevent duplication of disability benefits, and that a retirement pension is not a disability benefit. As discussed above, the goal of an offset provision is to coordinate wage loss or wage-replacement benefits generally. [13] This court lacks jurisdiction to determine whether reduction of permanent total disability benefits by receipt of public employee retirement benefits violates the employee s constitutional rights. Weber v. City of Inver Grove Heights, 461 N.W.2d 918, 43 W.C.D. 471 (Minn. 1990). [14] Cf., for example, Minn. Stat , subd. 8 ( For injuries occurring after January 1, 1984, an employee who receives Social Security old age and survivors insurance retirement benefits under the Social Security Act, Public Law is presumed retired from the labor market. For injuries occurring after October 1, 2000, an employee who receives any other service-based government retirement pension is presumed retired from the labor market. )