B E F O R E: 

                        THE HONORABLE RICHARD E. HICKEY, III
                        ADMINISTRATIVE SUPERVISORY JUDGE

 A P P E A R A N C E S:

                        FRANK S. SALZER, ESQ.
                        For the Petitioner 

PETER C. HARVEY, ATTORNEY GENERAL STATE OF NEW JERSEY
By:       MICHAEL O’BRIEN, D.A.G.
                        For the Respondent 

COMMISSIONER OF LABOR AS TRUSTEE OF THE SECOND INJURY FUND
By:       LINDA SCHOBER, D.A.G.
                        For the Second Injury Fund

This matter has been remanded from the Superior Court of New Jersey Appellate Division as a reversal in part and affirmance in part of the decision of the Division of Workers’ Compensation. Rosales v. State Department of the Judiciary, 373 N.J. Super., 29 (App. Div 2004) The decision of the Appellate Division of the Superior Court was decided on November 8, 2004 and affirmed Judge Moncher’s finding of total permanent disability based not only on this last compensable accident but pre-existing disabilities resulting in benefits afforded by both the respondent, State of New Jersey and the Second Injury Fund.  The Appellate Division of the Superior Court reversed Judge Moncher on the issue of offset against workers’ compensation benefits by ordinary disability retirement benefits.  The matter has been remanded for the purposes of determining the appropriate offset.  The Appellate Division also reversed and remanded on the issue of the discretion to avoid offset for a period necessary to accrue attorney’s fees and costs.  This issue is now moot since all periods of workers’ compensation award are offsetable either by the pension or social security disability.

Having heard the arguments of counsel and having received additional memorandum from the State of New Jersey it is the decision of this court that the State of New Jersey, in accordance with the opinion of the Appellate Division is entitled to a offset for benefits received under an ordinary disability pension for those conditions which represent both the award of pension and workers’ compensation.  Where in this case the pension is based solely on the work related condition the entire pension can be used to offset the workers’ compensation award.  However, if the ordinary disability pension was awarded for both non work related and work related conditions there must be an apportionment to determine what part of the pension overlaps with the workers’ compensation claim.  If there is no relationship between the ordinary disability pension condition and those of the workers’ compensation award, then there is no offset.

In determining the portion of the disability pension which is funded by taxpayer’s dollars as opposed to the monies contributed by the petitioner one must consider whether one’s own money can be offset against the workers’ compensation claim.  The Division of Pensions of the Department of The Treasury treats the annuity portion of ordinary and accidental disability pensions as service related as it is created by the annuitant’s personal contributions. The annuity of an ordinary disability pension will vary depending on the individual’s age, salary and years of employment.

§ 43:15A-25.1. Periodic benefits payable under Workers' Compensation Law; salary deductions paid by employer; retirement benefits application


   a. If any member of the retirement system receives periodic benefits payable under the Workers' Compensation Law during the course of his active service, in lieu of his normal compensation, his regular salary deductions shall be paid to the retirement system by his employer. Such payments shall be computed, in accordance with section 25 of P.L.1954, c. 84 (C. 43:15A-25), at the rate of contribution on the base salary subject to the retirement system, just prior to the receipt of the workers' compensation benefits. The moneys paid by the employer shall be credited to the member's account in the annuity savings fund and shall be treated as employee contributions for all purposes. The employer will terminate the payment of these moneys when the periodic benefits payable under the Workers' Compensation Law are terminated or when the member retires.

The member for whom the employer is making such payments, will be considered as if he were in the active service and shall be permitted to continue to make contributions to purchase the additional death benefit coverage provided by section 57 of P.L.1954, c. 84 (C. 43:15A-57).

b. An application for retirement benefits may be approved by the board of trustees while the member, applying for such benefits, is in receipt of periodic benefits under the Workers' Compensation Law. If a retirant receiving an accidental disability retirement allowance becomes a recipient of periodic benefits under the workers' compensation law after the date of retirement, the pension portion of the retirement allowance payable to the retirant shall be reduced, during the period of the payment of the periodic benefits, dollar-for-dollar in the amount of the periodic benefits received after the date of retirement, subject to the provisions of section 64 of P.L.1954, c. 84 (C. 43:15A-64). The reduction provided for herein shall not affect the retirant's pension adjustment benefits or survivor benefits that may be payable upon the death of the retirant. (Emphasis added)

If an accidental disability retirant receives a retirement allowance without reduction and periodic benefits under the workers' compensation law for any period of time after the date of retirement, the retirant shall repay to the retirement system the amount of the pension portion of the retirement allowance which should have been subject to reduction under this subsection. The repayment may be in the form of a lump sum payment or scheduled as deductions from the retirant's retirement allowance and pension adjustment benefits. If the retirant dies before full repayment of the amount required, the remaining balance shall be deducted from any death benefits payable on behalf of the retirant.

The New Jersey Supreme Court has held:

Work disabled employees are to be able to achieve the most advantageous combination of Workers’ Compensation benefits without offending our strong public policy against the award of double benefits for the same disability.  James v. PERS, 164 N.J. 396 (2000).

 That information is readily obtainable from the Division of Pensions on a case by case basis and the petitioner is entitled to make a knowing election of pension most advantageous to his or her situation.

In the case at bar the petitioner’s actual initial disability award was $673.95 per month and the annuity portion was $79.38.  Therefore, the disability portion of the pension was $594.57 per month or $137.21 per week.  Petitioner’s full compensation rate has been determined to be $329.19 per week.  Subtracting the pension offset of $137.21 per week from the full compensation rate, the petitioner will receive a workers’ compensation rate of $191.98.  Judge Moncher has determined that the petitioner was totally disabled on December 1, 1999.  At this point in time, the petitioner was already receiving her ordinary disability pension.  Petitioner’s share of fees and costs have been determined to be $6,279.22 for a period of 19 and 1/7 weeks covering the period of December 1, 1999 to April 12, 2000.  The petitioner is entitled to her full compensation rate of $329.19 to pay off these fees and costs.

The petitioner began receiving social security disability benefits on May 1, 2000.  Therefore, the offset rate elected by the State up to that date would be the offset rate as calculated from the ordinary disability pension.  However, since the reverse offset rate for social security disability is $93.69 per week the election as of May 1, 2000 would be to pay at the reverse offset rate for social security.  The petitioner’s social security initial entitlement included auxiliary benefits and at the age of eighteen when those benefits no longer are applicable to the minor child it will be the obligation of the State of New Jersey to determine whether at the time that the auxiliary benefit is terminated whether it is advantageous to continue the reverse social security offset or to apply the ordinary disability offset.

In matters involving total disability and social security disability the court must first determine the offset rate for ordinary disability in order to determine a workers’ compensation rate.  That rate coupled with the petitioner’s 80% ACE and initial entitlement would determine whether there was any residual social security offset.  It is this formula that has been used in calculating the social security offset rate for the petitioner in this matter.  When calculating the social security offset rate should the combined amounts of the workers’ compensation rate after ordinary disability offset and the initial entitlement to social security not exceed 80% of the individual’s average current earnings, there would be no offset for social security benefits.  If on the other hand the offset workers’ compensation rate and the initial social security benefit do exceed 80% of the petitioner’s average current earnings, the compensation rate may be reduced even further.  For purposes of calculation, I have used the initial entitlement concerning the ordinary disability pension the offset for disability pension should be calculated in the same manner that social security disability reverse offsets are calculated.  The respondent does not get benefit for an increased offset rate by virtue of cost of living increases in social security disability and therefore, the respondent should not benefit from cost of living increases in the petitioner’s ordinary disability pension. 

In the case of a third party settlement the respondent would not be entitled to an offset for monies paid to the petitioner pursuant to N.J.S.A. 34:15-40 since this represents the reimbursement for costs and or attorneys fees in the third party action. Fiore v. Trident Construction Co., 251 N.J. Super. 101 (App. Div. 1991), Owens v. C. & R. Waste Material, 76 N.J. 584 (1978). However, if the third party recovery is less than the workers’ compensation award, the pension offset would apply to monies over and above the third party recovery since they would constitute periodic payments of workers’ compensation.

With reference to counsel fee, I see no reason to disturb the award of counsel fee by Judge Moncher since it is solely within his discretion and may be based up to 20% of the benefits awarded prior to any offset.

The only issue in substantial dispute in the case at bar is whether the Second Injury Fund is entitled to the offset for the ordinary disability pension.  Petitioner’s attorney argues that the decision of the Appellate Division indicates that an offset may be taken for the same conditions.  Petitioner’s attorney further argues that it is his position that the Second Injury Fund pays for pre-existing disability and not for the same injuries compensated by the respondent.  Both the State and the Second Injury Fund disagree.  In the matter of James A. Bello petitioner-respondent v. Commissioner of the Department of Labor and Industry, as trustee of the 2% Fund, defendant-appellant, 56 NJ 41 (1970), the Second Injury Fund sought a review of an award of the Appellate Division which affirmed a ruling that the Fund was not entitled to a credit pursuant to N.J.S.A. 34:15-40 for the balance of the petitioner’s third party recovery which had not already been exhausted by the credit taken by the third party employer.  The Supreme Court in reversing the Appellate Division quoted from the decision of the Appellate Division a portion that they agreed with at page 415 and 416 “from the foregoing we are convinced that, rather than conferring new or separate benefits upon the employee, the One Percent Fund merely shifted the burden of paying part of the compensation benefits consequent upon the disability suffered by the employee, from the employer’s carrier to a fund derived from all carriers.  It follows that payments of benefits by the Fund are payments of compensation within the intendment of N.J.S.A. 34:15-40.”

The payment by the Second Injury Fund is not a new benefit conferred on the injured worker but merely a shifted burden of the paying of part of the compensation benefits as a result of the combination of the work related accident and pre-existing disabilities.  The Second Injury Fund does not stand apart, in fact stands in the shoes of the respondent for the purposes of any credit due whether it is section 40 of the statute or ordinary disability pension offset.  Wright v. Port Auth., 263 N.J. Super. 6 (N.J. Super. Ct., 1993).

Finally, it has been brought to my attention that a new Application for Stay was made in the proceedings and therefore any benefits not paid due to the petitioner are subject to interest.  Petitioner’s attorney may make application for additional fee, based upon the above, and any award of such fee will be based upon quantum meruit.

Attorney for the Respondent is directed to prepare an Order consistent with the above and submit same pursuant to the five day rule.

                                                                        _______________________________

                                                                        Richard E. Hickey, III
                                                                        Administrative Supervisory Judge

Date: April 13, 2005