Date: September 2018
The Minnesota Workers’ Compensation Act requires that employees who are off work are paid 66 and two-thirds percent (approximately 66.67 percent) of their average weekly wage for time missed. Minnesota Statutes, Section 176.021, Subdivision 5, allows public sector employees to supplement workers’ compensation lost time benefits with monies from vacation, sick leave and compensatory time to make up for the 33 and one-third percent (approximately 33.33 percent) of an employee’s wages that are not paid through the workers’ compensation benefits. This wage supplement is optional, and entities that want to enact such a policy should clarify the parameters of the practice in a written policy that applies to all employees.
Workers’ compensation payments are nontaxable. Workers’ compensation benefits are paid directly to employees. Injured employees of MCIT members receive their workers’ compensation benefit checks from MCIT.
When an injured employee is allowed to use accumulated vacation or sick leave or compensatory time to supplement his or her workers’ compensation payment, the employer must issue this payment. This payment is taxable and subject to deductions (i.e., FICA, income tax, PERA, cafeteria accounts, Section 125 deductions, health insurance, etc.).
Employers should not allow an employee to “turn over” his or her workers’ compensation check issued by MCIT, expecting the employer to issue a single payment equal to the employee’s wage. This scenario requires the employer to withhold deductions on nontaxable income and will require unnecessary employer contributions to funds such at PERA and FICA. It may also have adverse tax implications for the employee. An audit by the Department of Revenue that identifies this practice exposes the employer to penalties and fines.
When an injured employee loses time from work, MCIT is required to file a Notice of Primary Liability Determination (NOPLD) with the Department of Labor. The form identifies the amount of benefits MCIT will pay the injured worker. The member’s designated workers’ compensation contact also receives this form and should work with his or her payroll department to calculate any additional wage supplements to the employee.
When wage supplement is available, the member can use information on the NOPLD to issue a check for the difference between the workers’ compensation payment and the employee’s regular salary/wage, which is deducted from the employee’s accumulated vacation, sick time and comp time. As a result, the employee receives two checks. The checks should equal the employee’s average weekly wage prior to the date of injury.
Limited to Pre-injury Benefits
One of the fine points relative to an employee’s utilization of accumulated benefits while receiving workers’ compensation is that it limits the employee’s use of these benefits to the pre-injury accumulation. Benefits that accrue following the injury are not applicable in this situation.
Even if an employee returns to work and exacerbates or has a “flare up” of the original injury, the additional accumulation may not be considered. Only when a new injury occurs are additional benefits considered.
Change of Benefit Designation
A Notice of Intention to Discontinue is filed with members when wage replacement benefits end or are changed to another benefit designation, e.g., from temporary total disability to temporary partial disability, which typically signals a return to a job that pays partial wages. When a member receives the form, he or she should contact MCIT claims staff with any questions about how the change in status affects benefits payments.
For more information about this subject, members are encouraged to contact MCIT toll-free at 1.866.547.6516.
Originally published as “Wage Replacement and Supplemented Benefits,” July 2005 MCIT Bulletin