Claim Resolution Settlement Agreement (CRSA) vs. Pension: Which to Choose in a Workers’ Compensation Claim?

When faced with a workers' compensation claim in Washington State, one of the most important decisions you’ll have to make involves how to receive payment.

While a claim resolution settlement agreement from the Washington State Department of Labor & Industries might seem like a straightforward way to resolve your claim, it’s crucial to understand the nuances of different settlements. Making the wrong choice could have significant financial consequences down the road.

To ensure that you make the right decision, it’s wise to speak with a qualified workers' compensation lawyer. The skilled legal professionals at Lehmbecker Law can help you understand your options and pick the best one for your circumstances.

What Is a Claim Resolution Settlement Agreement?

A claim resolution settlement agreement (CRSA) is a voluntary agreement between an injured worker and the Department of Labor & Industries (L&I) or a self-insured employer to settle a workers' compensation claim. As part of this agreement, the injured worker receives payment in exchange for giving up future workers' compensation benefits.

What you get:

• Lump sum: You can choose to receive a one-time payment, regular payments over time, or a combination of the two.
• Flexibility: The payment can be tailored to your specific needs.
• Amount: The amount you receive will depend on factors like the severity of your injuries and your wages, future medical costs, and negotiation skills.

What you give up:

• Future benefits: By accepting a CRSA, you waive your rights to time loss, permanent partial disability (PPD) benefits, and medical coverage.
• Claim reopening: You generally can’t reopen your claim in the future.

A CRSA is a permanent, legally binding settlement with regulations governed by state law. You have 30 days to change your mind after signing a CRSA.

Who Qualifies for a CRSA?

Claim resolution settlement agreements are typically available to individuals who have successfully resolved a personal injury claim. To be eligible for a CRSA, you must meet the following criteria:

• Age requirement: You must be at least 50 years old.
• Claim duration: Your workers' compensation claim must have been open for at least 180 days.
• Medical condition: Your injuries must be permanent and prevent you from returning to your previous job.
• Doctor's recommendation: Your doctor must certify that your injuries are permanent and that you’re therefore unable to work.

Note that the amount of the lump-sum payment available via a CRSA will depend on the severity of your injuries and the strength of your accident.

Pros and Cons of a CRSA

Claim resolution settlement agreements offer a structured approach to settling claims, providing a steady stream of payments over a predetermined period. While this can be beneficial for certain claimants, it's important to weigh the potential advantages and disadvantages before making a decision.

Pros:

• Certainty: A CRSA provides a decisive end to your workers' comp claim.
• Lump-sum option: You have the option to receive a lump-sum payment, which can be beneficial for meeting your immediate financial needs.
• Structured payments: Structured settlements can offer a steady stream of income, promoting financial security over time.
• Versatility: You can customize the payment structure to meet your specific financial needs.

Cons:

• Finality: Once you sign a CRSA, you generally can’t reopen your claim, even if your condition worsens.
• Waiver of benefits: You give up your right to future workers' compensation benefits, including medical coverage and disability payments.
• Negotiation: The negotiation process can be complex and time-consuming.
• Potential for undersettlement: If you accept a CRSA without careful consideration, you may settle for less than you deserve.

You must weigh these considerations carefully when deciding whether a CRSA is the right choice for you. Consult a workers' compensation attorney for personalized advice to better understand each option.

Other Details of Claim Resolution Settlement Agreements

Importantly, a CRSA doesn’t preclude future workers' compensation claims arising from injuries or occupational illnesses, even if they result in the worker's death.

For self-insured employers, settlement negotiations are their responsibility. Employers can directly approach injured workers or their representatives to discuss potential settlements. However, any settlement that impacts a workers' compensation insurance fund requires prior written approval from L&I. This approval process takes 30 days to complete.

Is There a Tax on CRSAs?

Generally, structured settlements from workers' compensation claims aren’t subject to federal income tax. This is because the payments are categorized as compensation for physical injury or illness rather than income.

However, it's important to note that state and local tax laws may vary. Some jurisdictions may impose taxes on structured settlements, even if they’re exempt from federal taxes. As such, it's best to speak with a tax professional to determine the specific tax implications of your workers' comp structured settlement in your state or region.

What Is the Duration of CRSA Payments?

The duration of CRSA payments can differ depending on several factors, including:

• The severity of the injuries: More serious injuries typically result in longer settlement periods.
• The injured party's life expectancy: Settlements may be structured to last the lifetime of the injured party or a specific period.
• The official agreement: The duration of the settlement is ultimately determined by the agreement between the injured party and L&I or their self-insured employer.

Structured settlements can last for:

• A fixed number of years: The settlement may be set up to provide payments for a certain number of years.
• The lifetime of the injured party: In some cases, settlements may be structured to provide payments for the rest of the injured party's life.
• A combination of both: A settlement may include a fixed period followed by regular payments for the remainder of the injured party's life.

What Is a Workers' Comp Pension Settlement?

A workers' compensation pension settlement is a type of settlement agreement in which a permanently injured worker benefits from a long-term payment plan. Unlike a lump-sum settlement, which offers a one-time payment, a pension settlement provides a regular income stream over a specified period, often for life.

These settlements are typically reserved for cases where the injured worker has significant, lasting disabilities that prevent them from returning to work. The payments are designed to replace their lost income and ensure financial stability for the future.

The availability and specific terms of workers' compensation pensions can vary depending on the state or jurisdiction. Injured workers should talk to their employers, insurance companies, or legal representatives to determine their eligibility for a pension and the specific benefits they may be entitled to receive.

What Is a Disability Pension?

A disability pension is a form of financial compensation the Washington State Department of Labor & Industries offers to workers who have suffered work-related injuries or illnesses. The benefits are intended to help individuals maintain a reasonable standard of living while they’re unable to work due to their disability.

L&I only offers disability pensions for permanent total disability.

To qualify for a disability pension from L&I, you must have suffered a work-related injury or illness that prevents you from working. The specific criteria for eligibility may vary based on your location and the nature of your disability.

The amount of your pension will also hinge on several factors, including your average weekly wage, the severity of your condition, and any other applicable regulations.

Pros and Cons of a Pension Settlement

Disability pensions give injured workers a source of income when they can no longer work. They can be a valuable tool for promoting financial security in retirement, but they also come with certain advantages and disadvantages.

Pros:

• Regular income: Pension payments provide a consistent monthly income, ensuring financial stability.
• Lifetime income: This type of settlement can provide a lifetime income, even after you stop working.
• Professional management: Pension funds are professionally managed, reducing the risk of personal financial mismanagement.

Cons:

• Limited flexibility: Payments can be less flexible than with other options. For example, there may be restrictions on early withdrawals or changes in payment schedules.
• Risk of outliving savings: Even with a pension, there’s a risk of outliving one's savings, as can happen if the recipient lives longer than expected.

The specific advantages and disadvantages often come down to the individual's circumstances.

Do You Have to Pay Taxes on Your Workers' Comp Pension Settlement?

As mentioned, workers' compensation benefits are typically exempt from federal income tax. This includes pension settlements. For this reason, you won't see a deduction from your settlement checks for the IRS.

This tax-free status provides critical financial relief, allowing you to focus on rebuilding your life without the added burden of paying income taxes on your settlement.

Which Option Is More Beneficial?

There’s no clear winner between a claim resolution settlement agreement and a pension, as each option is meant to address a different situation and set of needs. Some of the key factors that may determine which works better for you include your age and general health, the nature and severity of your injury or illness, and your financial needs.

A pension will ordinarily be your best bet if you can no longer work due to a permanent disabling condition and require the stability and predictability of a long-term fixed income stream.

However, the majority of injured workers in Washington State will likely seek a CRSA, which can provide both compensation for their injuries and a definitive end to their workers’ comp claim.

Learn More About How to Obtain Compensation for a Workplace Injury

At Lehmbecker Law, we want all of our clients to have a complete understanding of their options and the respective benefits and drawbacks they present.

With so much at stake, you may be at a distinct disadvantage without legal advice from a knowledgeable workers’ compensation attorney. Contact us today to discuss your options in detail and find out how we can assist you in obtaining a CRSA or disability pension.