Jordan v. Sears, Roebuck & Co.

• Decision Date: 20 December 1994
• Docket Number: No. 7090,Docket No. WCB-93-854,7090
• Citation: 651 A.2d 358
• Parties: Kenneth JORDAN v. SEARS, ROEBUCK & COMPANY and Allstate Insurance Company. DecisionLaw
• Court: Maine Supreme Court

Page 358

651 A.2d 358

Kenneth JORDAN v. SEARS, ROEBUCK & COMPANY and Allstate Insurance Company.

Decision No. 7090.

Law Docket No. WCB-93-854.

Supreme Judicial Court of Maine.

Argued Sept. 22, 1994.

Decided Dec. 20, 1994.

James J. MacAdam, Maureen E. Dea (orally), McTeague, Higbee, Libner, MacAdam, Case & Watson, Topsham, for employee.

Alison Denham (orally), Douglas, Whiting, Denham & Rogers, Portland, for employer.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, and DANA, JJ.

GLASSMAN, Justice.

The employer, Sears, Roebuck & Company, appeals from a decision of the Appellate Division affirming the denial by the Workers' Compensation Commission of the employer's petition for coordination of benefits. The Commission held that, pursuant to 39 M.R.S.A. § 62-B (1989), ¹ an employer is not entitled to a coordination of compensation benefits when an employee rolls pension benefits over into an individual retirement account (IRA) until those funds are distributed from the IRA. We affirm the decision.

The record reflects the following undisputed facts: the employee, Kenneth Jordan, received a compensable back injury on April 29, 1987, while employed by Sears. Sears accepted liability for the injury and paid Jordan total incapacity benefits. Because of his inability to work, Jordan was forced to accept early retirement in November 1988. At the time of his retirement, Sears gave Jordan a $22,026.96 check for funds that Sears had paid into Jordan's pension account. The next day, Jordan deposited the funds in an IRA to defer taxation on the receipt of the money. See Internal Revenue Code, 26 U.S.C. § 402(c) (1993). Jordan, who is now 59 years of age, testified at the hearing that he intends to leave the pension funds in the IRA until he reaches the age of seventy.

In January 1992, Sears filed a petition to coordinate benefits pursuant to 39 M.R.S.A. § 62-B, seeking to have its benefit obligation reduced by the amount of the pension that had been rolled over into the IRA. The Commission denied the petition for coordination, concluding that because Jordan was not required to pay taxes on the funds that had been rolled over, Jordan had not "received" a "payment" of his pension benefits pursuant to section 62-B. On appeal by Sears, the Appellate Division affirmed the commissioner's ruling. We granted Sears' petition for appellate review pursuant to 39-A M.R.S.A. § 322 (Supp.1993).

Sears contends that it is entitled to immediately offset the $22,026.96 in pension funds against its obligation to pay workers' compensation benefits pursuant to the plain meaning of section 62-B that provides in pertinent part:

1. Application. This section applies when weekly compensation is payable to an employee under section 54-B or 55-B for any period for which he is receiving or has received old age insurance benefit payments under the United States Social Security Act ... or payments under an employee benefit plan.

....

3. Coordination of benefits. Benefit payments subject to this section shall be reduced in accordance with the following provisions.

A. The employer's obligation to pay weekly compensation under section 54-B or 55-B shall be reduced by:

....

(2) The after tax amount of the payments received or being received under an employee benefit plan provided by the same employer by whom benefits under section 54-B or 55-B are payable if the employee did not contribute directly to the plan....

39 M.R.S.A. §§ 62-B(1) & (3)(A)(2) (emphasis added). Section 62-B also provides the following definitions:

2. Definitions. As used in this section, unless the context otherwise indicates, the following terms have the following meanings.

A. "After tax amount" means the gross weekly amount of an old age insurance benefit or benefit under an employee benefit plan, reduced by the prorated weekly amount which would have been paid, if any, in social security, federal income and state income taxes, calculated on an annual basis. The after tax amount of any benefits subject to income taxes shall be determined by using the maximum number of dependents' allowances to which the employee is entitled and the standard deduction or zero bracket amount applicable to the employee's filing status. The chairman of the commission shall, by rule, adopt and publish tables governing the determination of after tax amounts under this subsection.

B. "Employee benefit plan" means a self-insurance disability plan, wage continuation plan, disability insurance plan and a pension or retirement plan which is funded or paid for by the employer in whole or in part....

39 M.R.S.A. § 62-B(2).

Our purpose in construing a statute is to give effect to the legislative intent. Pinkham v. Morrill, 622 A.2d 90, 95 (Me.1993). In determining the legislative intent, we look first to the plain meaning of the statutory language, Estate of Stone v. Hanson, 621 A.2d 852, 853 (Me.1993), and we construe that language to avoid absurd, illogical or inconsistent results. Rowe v. Chapman Trucking, 629 A.2d 1224, 1228 (Me.1993). In addition to examining the plain language, we also consider "the whole statutory scheme of which the section at issue forms a part so that a harmonious result, presumably the intent of the Legislature, may be achieved." Davis v. Scott Paper Co., 507 A.2d 581, 583 (Me.1986). If the statutory language is ambiguous, we then look beyond the plain meaning and examine other indicia of legislative intent, including its legislative history. Marchand v. Eastern Welding Co., 641 A.2d 190, 193 (Me.1994). We have noted that decisions of the Board interpreting the Workers' Compensation Act are "entitled to great deference and will be upheld on appeal unless the statute plainly compels a different result." Nielsen v. Burnham & Morrill, Inc., 600 A.2d 1111, 1112 (Me.1991).

We agree with Sears that the use of the word "shall" in subsection 62-B(3)(A) suggests that the employer is entitled to an immediate coordination of workers' compensation benefits on the employee's receipt of payments from an employee benefit plan. See 1 M.R.S.A. § 71(9-A) (Supp.1994) (use of the word "shall" in a statute indicates mandatory action). The issue in this appeal, however, is whether Jordan has "received" a "payment" that triggers the employer's right to a coordination pursuant to subsection 3(A)(2).

Sears argues that the pension funds were "received" when Sears relinquished control of those funds to Jordan. Jordan correctly notes that, pursuant to the provisions of the Internal Revenue Code, funds rolled over from a qualified employee benefit plan into an IRA are not taxed until they are ultimately distributed to the participant. I.R.C. § 408(d) (1993). Therefore, Jordan contends that the phrase "after tax amount" in subsection 2(A) modifies the words "received" and "payment" in subsection 3(A)(2) and suggests that the funds are not "received" until the employee is required to pay taxes on the receipt of those funds.

Sears also argues that the definition of "after tax amount," which requires a calculation of the "prorated weekly amount which would have been paid," implicitly contemplates the possibility of a calculation of tax liability prior to the imposition of taxes. See 39 M.R.S.A. § 62-B(2)(A) (emphasis added). We note, however, that the phrase "would have been paid" may also be interpreted as referring only to a forecast of tax liability on a year-by-year basis, not a forecast of future tax liability over the remaining life of an employee who is forced into early retirement by an injury.

We conclude that section 62-B is ambiguous on its face, and therefore, we look beyond the statutory language to determine the legislative intent. See Marchand, 641 A.2d at 193. We note, and both parties concede, that there is nothing in the legislative history that specifically addresses a coordination of benefits when, as here, an employee rolls over pension funds into an IRA. Section 62-B was enacted as part of an emergency effort to reduce insurance premiums and prevent carriers from withdrawing business from the state. See L.D. 1634, Emergency Preamble (112th Legis.1985); L.D. 1634, Statement of Fact (112th Legis.1985). The legislative debate suggests that the purpose of section 62-B was to ensure a minimum income during the period of an employee's incapacity and to prevent a double recovery of both retirement and compensation benefits. 2 Legis.Rec. 1184-85 (1985). Sears cites to a passage from the floor debates, in which one Legislator comments that "the Workers' Compensation System was never really meant to supplement retirement. It was meant as wage replacement.... What this Bill does is prevent double dipping." 2 Legis.Rec. 1184-85 (1985) (statement of Sen. Dutremble). Sears contends that the phrase "double dipping" refers to an employee whose employer is required to simultaneously pay two or more types of benefits to the employee. Jordan argues in response that he has not received duplicate benefits because he has not yet received his pension money as spendable income. ²

We note that in addition to allowing an offset for pension benefits, section 62-B also allows an offset for social security old-age benefits received by the employee. The Social Security Act does not compel an individual to apply for old-age benefits. Jordan may elect to take early old-age insurance benefits at age 62, or he may also elect to maximize his benefits by deferring his receipt of those benefits until age 65. See 42 U.S.C. §§ 402(a), (w) & 416(l ) (1988). We note, however that Sears' interpretation of section 62-B, taken to its logical conclusion, would require Jordan to take Social Security benefits at age 62 to provide the earliest possible set off for his employer. We are not persuaded that the Legislature regards an injured employee's refusal to take early social security benefits as "double dipping," nor are we persuaded that it is the intent of the Legislature to discourage employees...