NJ Pensions Funding WC Insurers

The New Jersey State Comptroller released a report examining a practice within the state’s Division of Workers’ Compensation (DWC) that allows state, school and local government employees injured on the job to seek weekly benefits, a lump sum settlement or continuing medical coverage, in addition to an accidental disability pension.

As deleterious as this practice may be for the state pension fund, eliminating it will only cost taxpayers more when the bigger picture is considered.

The DWC’s policies encourage workers’ compensation petitioners to settle claims that undermine New Jersey’s pension funds, provide windfalls to workers’ compensation insurance providers, including joint insurance funds and private insurance companies, and provide medical monitoring and coverage to employees without evaluating whether these benefits are justified by the nature of the injury. The benefit of DWC’s approach to a public employee is that the employee receives the same amount of monetary compensation through the accidental disability pension (ADP) while receiving coverage for medical treatments for the work-related injury beyond the two-year statute of limitations normally in effect. (page 1)

Under DWC’s approach, joint insurance funds and other insurance providers that otherwise would be required to make considerable workers’ compensation payments pay nothing more than the costs associated with the proceeding and attorney’s fees and agree to cover future medical costs related to the injury….All of the downsides of DWC’s use of medical monitoring settlements in the manner discussed in this report fall on the State’s pension funds and, ultimately, New Jersey taxpayers, as financial obligations that would have been satisfied by insurance providers are placed on the pension funds. (page 2)

As part of its administration of the pension funds, DPB calculates and creditsoffsets due to the receipt of workers’ compensation benefits administered by DWC in accordance with the law….New Jersey courts have long recognized that workers’ compensation laws are intended to prohibit the double recovery of both pension benefits for injured workers stemming from the same injury.workers’ compensation and disability pension benefits for injured workers stemming from the same injury. (pages 5-6)

The pension funds would have retained an incalculable, but no doubt substantial,amount of money if DWC had not adopted medical monitoring and coverage policies for petitioners who receive an ADP, not departed from a focus on weekly wages, not created a different process for dismissing the claims, not waived the statute of limitations, and not created new rules for attorney’s fees. Even if it were well within DWC’s discretion to create the medical monitoring settlement policies, using that discretion in a way that causes financial harm to the State and its pension funds and that relieves insurers of their financial obligations is wasteful and inadvisable. (pages 14-15)

All that will be accomplished with the elimination of this scheme is a bigger bill for taxpayers. Whereas benefits are now being paid out of a pension system that New Jersey has no practical obligation to fund properly, when Workers, Compensation insurers have to pick up those costs they will most certainly pass it on to the state which, being a captive of the insurance industry, will have no alternative but to pay in full.