March 23, 2010
STATE AUTHORITY TO PROHIBIT DOUBLE DIPPING OF WORKERS' COMPENSATION AND DISABILITY RETIREMENT BENEFITS
By: Jeanne Hayes, Legislative Fellow
You asked for a description of the state's legal authority to require a retired state employee to pay back retirement benefits received while he or she was also receiving workers' compensation benefits.
CGS § 5-170 prohibits retired state employees from receiving disability payments (workers' compensation) and retirement payments at the same time. If the state has erroneously overpaid a retiree by paying both benefits, it may seek reimbursement (CGS § 5-142; CGS § 5-170). This may be done by withholding future retirement payments. Retirees may petition the State Employee Retirement Commission (SERC) to be excused from having to repay overpayments, but retirees must satisfy all elements of a three-part test to successfully obtain a waiver of their repayment obligations.
Disability benefits are given with the expectation that a temporarily disabled employee will one day return to work. In some cases a temporary disability may, over time, be determined to be a permanent disability. At that point, the person may qualify for disability retirement. Retirement benefits, on the other hand, are given with the expectation that a former employee will not return to work; thus, the two benefits are mutually inconsistent. Collecting simultaneous payments from two different statutory schemes is often referred to as “double dipping”.
State employees cannot receive disability payments while simultaneously receiving retirement income payments (CGS § 5-170). The state may seek reimbursement from a retiree whom it has overpaid. (CGS § 5-142; CGS § 5-170). To recover for the overpayment of retirement benefits, the comptroller may petition the workers' compensation commissioner to assert jurisdiction over the claim, and may withhold future retirement income payments.
In some cases, SERC may waive repayment of an overpayment (CGS § 5-156). Waiver is allowed only where the: (1) recipient could not reasonably have been expected to detect the error, (2) commission believes that repayment will cause financial hardship to the recipient and cannot be required in good conscience or in equity, and (3) overpayment was through no fault of the recipient. All three parts must be met to receive a waiver. “No-fault” means that the recipient did not directly or indirectly falsify information leading to the overpayment.
If SERC denies a request for waiver of repayment, then it must notify the retiree of its decision. Although an appeals hearing is not statutorily or judicially mandated (Derwin v. State Employees Retirement Commission, 231 Conn. 411, 418 (1995)), SERC allows any retiree to appeal the denial of a waiver. According to Craig Henrici, general counsel for the comptroller, SERC has developed certain procedural rules for appeals. The appeal must be in writing and must ask for reconsideration “on the record” or reconsideration “request for hearing.”
Reconsideration on the record means that the commission will evaluate the appeal based upon all the information it has and is meant to accommodate retirees living out of state who may be unable to attend a hearing. Reconsideration request for hearing allows a retiree to attend a proceeding before the commission.
Reconsideration requests must contain:
1. a clear and short statement of the reasons why the retiree believes the commission erred,
2. documentary evidence supporting the retiree's position,
3. an error of fact or law contained in the decision that should be corrected,
4. any new evidence that materially affects the merits of the case and good reason why it was not previously submitted to the commission,
5. witness statements supporting the retiree's position, or
6. other good cause for consideration (See CT UAPA § 4-181a).
After a reconsideration hearing, or a reconsideration on the record, the commission will issue a decision. If the retiree disagrees with the decision, he or she may petition the commission for a declaratory ruling, which is necessary to preserve the right to appeal in court (CGS § 4-176; Conn. Agencies Reg., § 5-155(a)(1)). If the declaratory ruling is unfavorable, a retiree may appeal to the Superior Court (CGS § 4-183).
LEGISLATIVE HISTORY OF THE LAW
The idea that the receipt of state retirement benefits should be reduced by the receipt of disability benefits appeared as early as 1941. The general statutes provided: “[n]o person shall be paid a retirement salary for any month for which he shall receive payments resulting from a [workers'] compensation or other disability claim from the state or any political subdivision thereof or from any [workers'] compensation insurance carried by the state or any political subdivision thereof, except to the extent of the excess over such payment of such retirement salary which he would have been entitled to in the absence of such payments” (CGS § 12f (sup. 1941).
The legislative history indicates that the legislature wanted to ensure that no state employee would receive double compensation payments because of the operation of two separate statutory schemes (the retirement statutes and the workers' compensation statutes) (See Conn. Joint Standing Committee Hearings, Public Personnel, 1951 Reg. Sess. 187 (Ct. 1951)(“[the statute] recognizes that it would be unjust to pay an injured employee both a retirement salary and, in addition, to pay compensation for loss of earnings under the [w]ork[ers'] [c]ompensation Act”)).
While the law prohibiting the receipt of retirement and disability benefits has been in place since 1941, it was not until 1987 that the legislature passed PA 87-287 allowing the state to collect overpayments. In 1987, Senator Spellman stated the importance of allowing the state to recoup money: “[u]nder current law there is not any provision to prevent double payment where a person has been placed on retirement disability and subsequently receives a retroactive disability award from [w]orkers' [c]ompensation. . . this [law] enables the Retirement Division to make collection [of overpayments of disability awards that are retroactive in nature]” (An Act Concerning the Payment of Workers' Compensation and Retirement Benefits for State Employees: Hearing on H.B. 7615 Before the Senate, 1987 Leg., Reg. Sess. 3322-3333 (CT. 1987)).