If you or someone you love is disabled from a work injury, the disabled worker can receive 2/3rds (.66667) of their average weekly wage loss benefits on a weekly basis for up to 500 weeks. This is called temporary total disability or TTD. In some very narrow categories of permanent and total disability injuries, that can be extended to lifetime payments, often well beyond the 500 weeks.
Many employees prefer though, to settle their case rather than continue to receive weekly checks. As part of the settlement, they will ask for some or all of the future wage losses in a lump sum benefit as well as an estimate of the value of their future medical care, rather than continue to receive their wages and medical care from the workers compensation carrier on a weekly basis. That way, the employee has immediate access to their funds and can also invest the funds and even pass the money on to his or her heirs. If the worker gets another job or dies, then the payment stops and there are no funds to pass on to one’s children or grandchildren. Experienced North Carolina or Virginia worker’s compensation lawyers understand how to properly value your case so that you or your loved one gets all that he/she deserves.
The amount of the lump sum that needs to be calculated as to your future comp payments is essentially 2/3rds of your average weekly wages up to 500 weeks; however, there may be initial discounts to consider if it is anticipated that you will return to work sometime before the end of the 500 weeks. In addition, there is no guarantee that you will live for the entirety of the 500 weeks. You could, in fact, die from unrelated causes and if that happens, or if you return to work at the same or higher wages, then the weekly payments would stop.
Another consideration is that if you get paid in a lump sum, in North Carolina, your calculation as to future payments must be discounted because you can invest your settlement funds into interest bearing accounts. This is called figuring out the PRESENT VALUE of the future amounts.
We typically do not do this in Virginia, because Virginia provides workers under Awards with the right to COLA payment increases whereas North Carolina does not. Do in Virginia, if we simply take out the anticipated future COLA payments when figuring out the future lump sum amounts, then any gains are really offset by inflation, so there is no discount rate needed.
North Carolina, on the other hand, does not provide COLA as part of its compensation scheme, so you give nothing up when figuring up future lump sums. So you must therefore reduce to present value.
Present Value and the Discount rate.
The discount rate is a way of figuring what the present value of your future income should be in North Carolina. For example, if your Average Weekly Wage (AWW) is $900.00, your compensation rate is 2/3rds of that, or $600.00. If you elect to be paid weekly over 500 weeks, you will ultimately receive $600.00 x 500 weeks= $300,000.
If the interest rate is calculated at three 3 %, the present value of your money is approximately $260,500.00. In other words, if you invest $260,500.00 at 3 percent yearly interest, you will generate $300,000 in money in 500 weeks. In this example, your $300,000 in income is being discounted about 13% down to the $260,500 figure.
While financial experts understand how much money a settlement will earn if it obtains, for example, three percent per for 30 years, the experts don’t know whether the interest rates may change over time.
- It may be that the interest rate decreases during the 500-week period. In this scenario, a three percent return is a good deal;
- If may be that the interest rate increases over time. In this scenario, the three percent return is a bad deal
Generally what is done is that the parties argue and usually compromise over the discount rate during negotiations. The defense obviously wants to pay less so they will use a higher discount rate, where the injured worker’s attorney will argue that while higher interest rates are available, the investments that produce them are often more risky and volatile, and less safe. The injured worker’s lawyer will argue that something safe would be something like treasury bonds or other such instruments, which typically pay something like 3-4%, depending on the year. Defense attorneys will argue for investments in the 6-8% range or higher.
Life Expectancy Determination and Future Medical Care
In both North Carolina and Virginia, while most employees are limited to TTD payments up to 500 weeks, that is not the only component that goes into figuring up the value of a potential settlement. There is also the lifetime medical award, and this is where it is important to understand your life expectancy. For instance, if you are on certain expensive prescription medications for your injuries, and it is likely you will have to remain on them for the rest of your life, this could be a huge component and “exposure” to the workers compensation carrier which may motivate them to settle your claim.
As an example, let’s assume you are a 55-year-old male injured worker in Virginia. Using the table for Virginia below, we are entitled to assume your life expectancy is 24.3 years. Let’s say that you are taking an expensive prescription that is costing the comp carrier $500.00 per month. That translates to an annual cost of $6000.00 x 24.3 years, which is a future prescription cost of $145,800.00. Along with future potential surgeries, or other treatment as recommended by your doctor, this future medical treatment can form a significant component of any demand to fully and finally settle your claim.
North Carolina uses the following life expectancy figures for worker’s compensation cases (just the first few years and then increments of five years are provided):
- 18 58.8
- 19 57.9
- 20 56.9
- 25 52.2
- 30 47.5
- 35 42.9
- 40 38.3
- 45 33.8
- 50 29.3
- 55 25.1
- 60 21.1
- 65 17.5
- 70 14.2
- 75 11.2
- 80 8.5
Virginia uses the following life expectancy figures (for both genders, for just men, and for just women)
- Age Both Men Women
- 18 60.3 57.7 62.8
- 19 59.3 56.7 61.8
- 20 58.4 55.8 60.8
- 25 53.6 51.2 56
- 30 48.9 46.5 51.1
- 35 44.1 41.8 46.3
- 40 39.5 37.2 41.5
- 45 34.9 32.8 36.9
- 50 30.5 28.5 32.3
- 55 26.2 24.3 27.9
- 60 22.2 20.4 23.7
- 65 18.4 16.8 19.7
- 70 14.8 13.4 15.9
- 75 11.7 10.5 12.5
- 80 8.9 7.9 9.5
Note that we typically do not discount the future medical component of the settlement because of the ongoing very high increases in medical costs. When calculating medical costs, we are using static figures available to us now, so any future lump sum on the future medical already has a built-in discount as we are not considering those future increased costs.
Additional lump sum benefit considerations
There are other factors that are crucial in determining the amount of any full and final settlement. Some of these factors are:
- The number of weeks you already received benefits must be calculated.
- Lump sum settlements can also be used if you have an impairment that has been rated but not if you are currently receiving TTD benefits.
- The availability of other public benefits. You must consider your Medicare benefits. You should consider your SSI (Supplemental Security Income) and SSDI (Social Security Disability Insurance) benefits. A settlement can affect how much SSDI you receive. This may require a Medicare Set Aside.
- The availability of private benefits such as disability insurance or other health insurance
- Your financial situation before you settle
- The likelihood that you are going to be able to find a job after settlement—are you currently in vocational rehabilitation and are they close to finding you a job?
- Your age and skill set
- Whether you’ve reached maximum medical improvement
- What are the amounts of any outstanding, related medical bills that the carrier has not yet paid? This should be part of any settlement as well.
- Many other factors
After the future TTD estimates and Future Medical costs are added up, we will typically then present a figure that we request for our demand in the case. Other components that might go into the demand are future medical travel costs, future x-rays, MRI’s or other medical monitoring. We also always ask that the carrier pay any outstanding, related medical costs that have not yet been paid. In addition, ongoing weekly payments typically continue until issuance of the Settlement Order by the Virginia Workers Compensation Commission or Industrial Commission.
Note that if you are a current Medicare recipient, ALMOST NONE OF THIS APPLIES as you will have to engage in a MEDICARE SET ASIDE (MSA) and Medicare will have to approve the MSA amounts in order for you to receive any kind of medical settlement. In these circumstances, your future medical costs will be calculated by one of any number of companies who will submit a report estimating the cost of your future, injury-related care to Medicare for approval. You or your attorney will have no control over determining those estimates. The only items that will fall outside the purview of the MSA are items that would not be covered by Medicare. For instance, certain prescriptions are not approved by Medicare for treating pain.
We recommend that you do not try to negotiate your lump sum full and final settlement or clincher on your own. You can’t renegotiate the lump sum payment if you make a mistake. Any worker considering a full and final settlement (called a clincher in North Carolina) should consult with an experienced North Carolina or Virginia workers’ compensation attorney. You may be wildly underestimating what your case is worth.
Do not settle your claim without speaking to an experienced work injury lawyer. Attorney Joe Miller Esq. has been helping injured workers get justice for over a quarter century. He understands how to negotiate and what wage and medical benefits you are entitled to. To learn what your rights are, please call lawyer Joe Miller at (888) 694-1671. You can also reach him through his contact form.
