FACTORS FOR COMMUTATION OF COMPENSATION AWARDS REVISITED
The Iowa Supreme Court has previously identified the following four factors that the Commission must consider when deciding whether to commute a running award for benefits:
- The worker's age, education, mental and physical condition, and actual life expectancy (as contrasted with information provided by actuarial tables).
- The worker's family circumstances, living arrangements, and responsibilities to dependents.
- The worker's financial condition, including all sources of income, debts and living expenses.
- The reasonableness of the worker's plan for investing the lump sum proceeds and the worker's ability to manage invested funds or arrange for management by others (for example, by a trustee or conservator).
These factors were never meant to be exclusive, so the employer in Hessenius argued that the employee seeking commutation should have to show how he intended to make up the lost weekly income. The Iowa Court of Appeals said that the Commission must consider the employee’s financial condition, but there is no requirement that the employee show he can make up the lost revenue each week, nor did the Court of Appeals see fit to create such a requirement. The employee showed he had a robust and conservative investment strategy that would yield considerable growth over time. That was enough.
When Iowa’s Supreme Court articulated the four factors above, it did so based on the following statutory language: “Such commutation will be for the best interest of the person or persons entitled to the compensation.” IOWA CODE § 85.45(1)(b). Even though Section 85.45 has been through multiple changes, that language has remained, and is still in effect today. As such, whenever a lump sum settlement agreement is submitted for approval, all four factors must still be considered by the Commission.
Hessenius is a good reminder that other factors, in addition to the four listed above, might also be considered by the Commission before they will approve a requested commutation. When submitting a commutation for approval under Section 85.45, it is important to submit evidence for each of the four factors above, but you should also consider providing additional evidence to prove beyond the four factors above that it is in the “best interest” of the person entitled to benefits, to approve the commutation.
If you have questions about how the four commutation factors might apply to the facts of your case, or about commutation of compensation benefits more generally, please contact Paul Barta or Micah Hawker Boehnke at 402-475-1075.