If this were all that this case involved, it would be a relatively simple matter requiring no further discussion. However, because the underlying New Jersey law is far from straightforward, resolution of the case is substantially more complicated. To aid the court in reaching the correct decision, it requested supplemental briefing on the intricacies of New Jersey worker's compensation offset provisions.
In Ries v. Harry Kane, Inc., 195 N.J.Super. 185, 478 A.2d 1195 (App.Div.1983), the Appellate Division discussed the application of 34:15-95.4 and 95.5 to workers, such as the plaintiff, who became disabled prior to 1980. The court noted that the primary purpose of 34:15-95.4 was to provide additional benefits to workers whose benefit rates had been eroded by inflation. It observed that if the offset provisions of both 34:15-95.4 and 95.5 were applied, then the worker would lose the entire special adjustment benefit due to the offset in 95.4, and also suffer the generally-applicable offset in 95.5. He would, therefore, not receive any benefits in addition to what he had been receiving before the enactment of 95.4. In order to avoid "the anomalous result of a bill which is intended to increase benefits, yet does not do so[,]" Id. at 196, 478 A.2d 1195, the court concluded that 95.4 was "intended as the sole integration with social security benefits for employees who were disabled at pre-1980 rates, and thereby providing what is referred to as the 'reverse offset' allowed by 42 U.S.C. 424a(d) for those individuals receiving disability under worker's compensation disability rates in effect prior to 1980." Id. at 190-91, 478 A.2d 1195.
As the Ries court envisioned it, a worker disabled prior to 1980 would generally have his entire adjustment benefit offset because his social security benefit exceeds the supplementary benefit, but would nevertheless come out ahead. This would result because the offset embodied in 95.5 would not apply and the disabled worker could keep not only his regular worker's compensation benefit but also his entire social security benefit. That is, "the New Jersey worker will receive the money previously withheld by the Federal Social Security agency. . . ." Id. at 196, 478 A.2d 1195 (quoting the compensation judge).
The Ries court held that this result was consistent with federal law since, in its view of 42 U.S.C. 424a(d), "the State reduction need only be a significant reduction and need not be on a dollar-for-dollar basis." Id. at 195, 478 A.2d 1195. This court agrees. There is simply nothing in 42 U.S.C. 424a(d) which requires that state deduction be on a dollar-for-dollar basis.
The Secretary relies on Swain v. Schweiker, 676 F.2d 543 (11th Cir.1982), in which the Eleventh Circuit held that since Florida law did not permit "imposition of an offset against worker's compensation by the amount of any past-due lump-sum social security benefits," Id. at 545, it was appropriate for the Social Security Administration to reduce the lump-sum social security benefit to offset the worker's compensation received by the disabled worker.
Swain does not hold that the state reduction under 42 U.S.C. 424a(d) must be on a dollar-for-dollar basis. Instead, Swain emphasizes that the purpose of 42 U.S.C. 424a(d) is to prevent the receipt of duplicative state and federal benefits. Id. at 546. Under Florida law, a disabled worker loses no portion of his worker's compensation due to the receipt of retroactive social security benefits. Instead, he receives the full amount determined by the Florida legislature to be appropriate during the period between the onset of disability and the receipt of social security benefits. In such a situation, were the Social Security Administration barred from reducing its retroactive lump-sum payment, a disabled worker would receive a double benefit. In contrast, a New Jersey worker disabled prior to 1980 loses his entire special adjustment benefit due to his receipt of social security benefits. Moreover, if the Social Security Administration is barred from reducing his social security benefits, he does not receive a double benefit. Although he does receive some additional benefit, that additional benefit is precisely what the New Jersey Legislature intended.
It may seem strange that the New Jersey Legislature could increase the money received by its disabled workers at the expense of the Social Security Administration. However, if instead of providing a special adjustment benefit, the New Jersey legislature had simply increased the regular benefit payable to workers disabled prior to 1980 and provided that all worker's compensation benefits would be reduced due to the receipt of social security benefits, then the Administration would not reduce social security benefits. Such hypothetical legislation illustrates that Congress left open the possibility that the states would use the savings offered to them in 42 U.S.C. 424a(d) to increase the amount available to disabled workers rather than to keep benefit levels the same and pass on all savings to the worker's compensation carriers.
Since New Jersey law provides for significant reduction of worker's compensation benefits to workers disabled prior to 1980 due to the receipt of social security benefits, and since this offset is inevitably reflected in any settlement of the worker's compensation claim, and since a double recovery for the disabled worker does not result, the Social Security Administration may not reduce social security benefits due to the receipt of the worker's compensation settlement. Plaintiff Guiseppe Sciarotta is entitled to the full amount of his social security disability benefits.
An order consistent with this opinion will be entered by the court.
This matter comes before the court pursuant to 42 U.S.C. 405(g) and General Rule 48 of the United States District Court for the District of New Jersey to review a determination of the Secretary of the Department of Health and Human Services. For the reasons stated in the accompanying opinion, IT IS ORDERED, on this 14 day of November, 1986, that the decision of the Secretary is reversed. The Secretary is directed not to reduce plaintiff's social security benefits due to the plaintiff's receipt of a lump sum settlement of his worker's compensation claim.