Statutory and Rule Provisions
Texas Labor Code (TLC) Section 408.0815, enacted as part of House Bill 2089, 82nd Texas Legislature Regular Session (2011), required the commissioner of workers’ compensation to establish by rule a procedure through which an IC could recoup underpayments and overpayments of workers’ compensation income benefits. Before this legislative change, without a specific statutory or rule provision an IC could not recoup the overpayment of income benefits from an IE’s future benefits. APD 060318. An exception was when the overpayment was due to a miscalculation of the IE’s AWW.
Concerning overpayments, the procedure under TLC Section 408.0815(a)(1) would allow an IC to recoup an overpayment of income benefits from future income benefit payments that are not reimbursable under TLC Section 410.209 (relating to overpayments of benefits eligible for reimbursement by the Subsequent Injury Fund (SIF)).
The procedure for IC recoupment of overpayments of income benefits had to include a process by which an IC must notify an IE of:
• an overpayment of income benefits;
• the time frame and methodology by which an IC could recoup an overpayment through the reduction of a future income benefit payment; and
• a method for coordinating overpayments that may be recouped from future income benefits and reimbursements described by TLC Section 410.209.
TLC Section 408.0815(b)(3)-(5).
Under TLC Section 408.0815(c), the procedure for recouping overpayments under Subsection (a)(1) must take into consideration the cause of the overpayment and minimize the financial hardship to the IE.
Effective on January 1, 2012, 28 Texas Administrative Code (TAC) Section 126.16 (titled “Procedures for Recouping Overpayments of Income Benefits”) implemented TLC Section 408.0815. That rule applies only to IC overpayment of income benefits. The rule does not apply to:
1) IC overpayment of death, burial, or medical benefits;
2) redesignation of income benefits; or
Under 28 TAC Section 126.16(b), if an IC determines that it has overpaid income benefits to an IE, the IC may recoup the overpayment from future income benefit payments as follows:
1) The IC must notify the IE in writing that it will begin withholding benefits to recoup an overpayment. The notice must be in plain language and in English or Spanish, as appropriate. The notice must also include the reason for the overpayment; the amount of the overpayment to be recouped from future income benefit payments; the date recoupment will begin; and relevant documentation that supports the IC’s determination of an overpayment, such as a wage statement or a supplemental report of injury. The notice must also advise the IE that if the IE disagrees that there has been an overpayment, the IE may request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title (relating to Dispute Resolution), including expedited dispute resolution. The IC may not begin recoupment of the overpayment earlier than the second income benefit payment made after the written notice has been sent to the IE.
2) If the IE’s income benefits are not concurrently being reduced to pay approved attorney's fees or to recoup a DWC-approved advance, the IC may recoup the overpayment under this subsection in an amount not to exceed 25% of the income benefit payment to which the IE is entitled, except as provided by subsection (c) of this section.
3) If the IE’s income benefits are concurrently being reduced to pay approved attorney's fees or to recoup a DWC-approved advance, the IC may recoup the overpayment under this subsection in an amount not to exceed 10% of the income benefit payment to which the IE is entitled, except as provided by subsection (c) of this section.
28 TAC Section 126.16(c) provides that, if the IC wishes to recoup the overpayment in an amount greater than that permitted by subsection (b) of this section, the IC must attempt to enter into a written agreement with the IE and, if unable to do so, request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title. If the IE wishes to provide for recoupment of the overpayment in an amount less than the percentage chosen by the IC, the IE must attempt to enter into a written agreement with the IC and, if unable to do so, request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title.
In determining whether to approve an increase or decrease in the recoupment rate, DWC must consider the cause of the overpayment and minimize the financial hardship that may reasonably be created for the IE. 28 TAC Section 126.16(d).
Under 28 TAC Section 126.16(e), the IC must provide notice to the IE and DWC of any change in the payment of an IE’s income benefits in accordance with the requirements of 28 TAC Section 124.2 of this title (relating to Insurance Carrier Reporting and Notification Requirements). The IC’s notice to the IE must identify the amount that was overpaid.
The rule does not create an entitlement for an IC to seek reimbursement from the SIF except as provided by TLC Sections 403.006 (relating to SIF), 408.0041 (relating to Designated Doctor Examination), 410.209 (relating to overpayments of benefits eligible for reimbursement by the SIF), and applicable DWC rules. 28 TAC Section 126.16(f).
Under 28 TAC Section 126.16(g), if an IE does not agree that he or she has received an overpayment of income benefits, the IE may request dispute resolution through the dispute resolution processes outlined in Chapters 140 - 144 and 147 of this title, including expedited dispute resolution.
The rule does not affect DWC’s authority to identify and take action on overpayments on its own motion. 28 TAC Section 126.16(h).
Income Benefits vs. Medical Benefits.
As noted above, ICs can only recoup overpayments of income benefits, not medical benefits. Income benefits and medical benefits are of a different kind and character, and one may not be reached to satisfy an overpayment of the other no matter the reason for the overpayment. APD 002508-s. Travel reimbursement for medical care is a medical benefit. APD 022547. See 28 TAC Section 134.110 on reimbursement for travel expenses for medical treatment. [Cross-reference: Reimbursement for Medical Travel Expenses (M02)]
AWW and Recoupment.
The ALJ found that the IC was entitled to reduce the IE’s IIBs to recoup a previous overpayment of $2,699.48. The overpaid amount was based on a Notice of Disputed Issue(s) and Refusal to Pay Benefits (PLN-11) from November 2012 stating that the IE was paid $18,320.69 in benefits but was only entitled to $15,621.21. The IC had initially paid benefits based on a reasonable assessment of the AWW, but, after it received a DWC Form-003, Employer’s Wage Statement, the AWW was recalculated at a lower amount. The parties later agreed to an AWW of $735.86 as part of a DWC Form-024, Benefit Dispute Agreement, in November 2013. The AP reversed and remanded the decision of the ALJ because the amounts found in the PLN-11 were not based on the AWW agreed to by the parties in the later DWC Form-024 and the ALJ did not consider the parties’ agreement in determining the recoupment issue. The AP directed the ALJ to make a finding of the AWW that should be used to decide the IC’s overpayment, if any, and identify the calculations and relevant time periods used to arrive at the amount determined to be overpaid, if any. APD 140981.
Line of Duty Pay.
In City of San Antonio v. Vakey the Fourth Court of Appeals noted that line of duty payments made under Local Government Code Section 143.073 are not considered salary supplements or salary continuation. It further noted that, while TLC Section 504.051 permits a city self-insured to offset the amounts paid for TIBs by the amounts paid for line of duty pay, it is the amount paid under Local Government Code Section 143.073 that is reduced, not the workers' compensation benefits. City of San Antonio v. Vakey, 123 S.W.3d 497 (Tex.App.-San Antonio 2003, no pet.).
Redesignation of Overpaid TIBS as IIBS.
TIBs continue until the IE reaches MMI, if the IE has disability, and an IE's entitlement to IIBs, as well as the IIBs accrual date, begins on the day after the IE reaches MMI. TLC Sections 408.101(a); 408.102(a); and 408.121(a); 28 TAC Section 130.8(a).
Where an IC has paid TIBs to an IE after what is later determined to be the MMI date, the TIBs payments made after the MMI date are redesignated as IIBs, and the IC can take credit as IIBs those income benefits it paid to the IE as TIBs after the MMI date. APD 94872. The redesignation of income benefits is different from recoupment, which allows for reduction or suspension of income benefits to offset a previous overpayment. APD 110692.
Redesignation of SIBs as Lifetime Income Benefits (LIBs)
The IE had been paid TIBs, IIBs, and SIBs through 401 weeks. The parties stipulated that the IE was entitled to LIBs with an accrual date of June 10, 2016. The ALJ determined that the IC was not entitled to redesignate SIBs paid after June 10, 2016, as LIBs, reasoning that LIBs are different from SIBs, which she wrote are payable for an inability to earn a pre-injury wage. In her discussion, the ALJ noted that an IE could return to work and still receive LIBs. She concluded that LIBs are paid for specifically listed medical conditions, and no express provision allows for a reduction or elimination of the benefits based on previous amounts paid for SIBs. The AP disagreed, citing APD 000508. In that case, the AP noted the ALJ’s determination that IEs are not entitled to concurrently draw LIBs and IIBs appears to be a correct statement under the law, and it perceived no error with the ALJ’s general conclusion. Although APD 000508 applied to IIBs, the AP in 220175-s viewed the reasoning for the holding in that case to apply as well to the redesignation of SIBs, which it stated was analogous to the situation in which an IC pays TIBs to the IE after what is later determined to be the MMI date. In that circumstance, TIBs payments made after the MMI date are redesignated as IIBs, and the IC can take credit as IIBs those income benefits it paid to the IE as TIBs after the MMI date. The AP distinguished between redesignation of benefits and recoupment. Unlike recoupment, redesignation is a recharacterization of the benefits paid. The AP reversed the ALJ’s determination and rendered a decision that the IC is entitled to redesignate SIBs paid after June 10, 2016, as LIBs. APD 220175-s.