Rules Adopted to End NJ Pension Cost Shifting

The New Jersey Department of Labor and Workforce Development [DLWD] has proposed Rules that adopted the recommendations of  NJ State Comptroller. A February 2021 investigative report by the NJ State Comptroller raised critical issues common to other state and national collateral social insurance programs challenged by current fiscal limitations. The rules are effective as of March 7, 2022.  54 N.J.R.448(a). The Rules were adopted without change and have retroactive application.

The New Jersey Office of the State Comptroller [O.S.C.] determined that the use of medical monitoring settlements entered by the N.J. Division of Workers’ Compensation [D.W.C.] for injured employees was inconsistent with law and public policy. The O.S.C. concluded that employers must pay complete workers’ compensation benefits, and the state pension system should be permitted to take an offset in benefits than it pays out.

 

Cost-Shifting

The D.W.C. settlement using the medical monitoring mechanism, the report concluded, creates a cost-shifting of the burden of work-related accidents and exposures from employers to the State's taxpayers. The workers’ compensation insurance program's legislative intent was to pass the cost of injuries and accidents to the consumers of products and services and not to general taxpayers. 

Cost shifting by employers and workers’ compensation insurance companies is a national issue. The Medical Secondary Payer Act [M.S.P.] enacted in 1980 permits the US Centers for Medicare and Medicaid Services [C.M.S.] to seek reimbursement for medical costs from employers and their insurance companies for work-related injuries. 

Click here to read the complete “Investigative Report” An Examination Into the Use of Medical Monitoring Settlements by the Division of Workers’ Compensation and the Impact on the State’s Pension Funds,” NJ Office of State Controller, February 4, 2021.

Likewise, the Social Security System can seek an offset in most jurisdictions for disability insurance payments to injured workers. Ironically, NJ remains one of the few states grandfathered by federal legislation to take a reverse offset allowing the employers and their insurance companies to take the offset. 

Proposed Rules

SUBCHAPTER 3. FORMAL CLAIMS 

12:235-3.11 Pre-trial conference

(a) In any formal proceeding, the Division shall schedule a pre-trial conference where the following shall be accomplished: 

1.-4. (No change.) 

5. There shall be an adjournment upon good cause shown. 

i. "Good cause" for an adjournment shall not include that the injury or illness upon which the subject claim before the Division of Workers' Compensation is based is also the basis for a pending application to a pension fund administered by the Division of Pensions and Benefits within the Department of the Treasury, including, but not limited to, the Public Employees' Retirement System (PERS), the Police and Firemen's Retirement System (PFRS), [page=1337] and the Teachers' Pension and Annuity Fund (TPAF), for an accidental disability pension allowance. 

(b)-(d) (No change.)
12:235-3.12 Conduct of formal hearings (a)-(c) (No change.) 

(d) The Judge of Compensation shall, at the commencement of the day, call the list of cases in open court. No adjournment shall be granted unless there is found to be good cause. No adjournment shall be granted for medical examination unless the name of the examining physician and date of examination are supplied. 

1. "Good cause" for an adjournment shall not include that the injury or illness upon which the subject claim before the Division of Workers' Compensation is based is also the basis for a pending application to a pension fund administered by the Division of Pensions and Benefits within the Department of the Treasury, including, but not limited to, the Public Employees' Retirement System (PERS), the Police and Firemen's Retirement System (PFRS), and the Teachers' Pension and Annuity Fund (TPAF), for an accidental disability pension allowance. 

(e)-(x) (No change.) 

12:235-3.19 Pension offset; public employees; accidental disability retirement 

(a) When the injury or illness upon which the subject claim before the Division of Workers' Compensation is based is also the basis for a pending accidental-disability pension application to a fund administered by the Division of Pensions and Benefits within the Department of the Treasury, including, but not limited to, the Public Employees' Retirement System (PERS), the Police and Firemen's Retirement System (PFRS), and the Teachers' Pension and Annuity Fund (TPAF), the following shall occur: 

1. Both the workers' compensation petitioner and the workers' compensation respondent shall immediately notify the Division of Pensions and Benefits of the filing of the claim petition with the Division of Workers' Compensation; 

2. Except at (a)3 below, the approval by a Judge of Compensation of a continuing medical monitoring settlement shall be prohibited and the workers' compensation claim petition shall result in one of the following outcomes: 

i. The award by a Judge of Compensation of a monetary judgment after trial; 

ii. The approval by a Judge of Compensation of a settlement agreement reached pursuant to N.J.S.A. 34:15-20 (Section 20 settlement); 

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iii. The approval by a Judge of Compensation of a settlement agreement reached pursuant to N.J.S.A. 34:15-22 (Section 22 settlement); 

iv. The dismissal by a Judge of Compensation of petitioner's claim after trial for failure of petitioner to meet their burden; or 

v. The dismissal by a Judge of Compensation of petitioner's claim petition pursuant to N.J.S.A. 34:15-54 for lack of prosecution; 

3. Where the workers' compensation claim petition is for an occupational disease (for example, asbestosis), under appropriate circumstances based on the facts presented, and when not used in a way to avoid a pension offset, a Judge of Compensation may approve a continuing medical monitoring settlement; and 

4. Upon a Judge of Compensation granting a judgment, approving a settlement award, or dismissing petitioner's claim before the Division of Workers' Compensation, both the workers' compensation petitioner and the workers' compensation respondent shall immediately provide a copy of the award, order approving settlement, or order of dismissal, as the case may be, to the Division of Pensions and Benefits, within the Department of the Treasury. 

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