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Advisory 96-16

WAGE STATEMENTS, FRINGE BENEFITS, AVERAGE WEEKLY WAGE, AND THE CALCULATION OF COMPENSATION RATES

The Commission has recently released a new Wage Statement, TWCC-3, that provides more instruction regarding the information required on the form. Part of this Advisory's purpose is to serve as warning that versions of the TWCC-3 prior to the 8/20/96 version of the form contain an error that could result in the overpayment of Temporary Income Benefits.

The new version of the form is available for immediate use and employers are encouraged to begin using it. After October 1, 1996, employers must use the four -page version of the Wage Statement. Employers are allowed to continue using either version of the four-page form through 12/31/96, but after this date, employers must use the 8/20/96 version of the four-page form.

Insurance carriers should ignore the optional instructions for calculating average weekly wage on the back of wage statements prior to the 8/20/96 version. Carriers should the use guidance provided by the rules and this advisory and may use the following work sheet to calculate compensation rates. This work sheet is the same as the one on the 8/20/96 version of the TWCC-3.

In addition, the Commission has been receiving questions relating to fringe benefits, wage statements and the calculation of compensation rates. This Advisory's other purpose is to eliminate any confusion regarding the requirements of the Wage Statement and the carrier's use of that information to calculate the Average Weekly Wage (AWW) and income benefit compensation rates.

TWCC-3 Completion - Wages Paid in the 13 weeks Immediately Preceding the Date of Injury

The first major issue related to whether an employer could adjust the 13 weeks immediately preceding the injury a few days to simplify completion of the form by letting the weeks line up more naturally with the standard Monday through Sunday scheduling system or the employer's pay periods. It is acceptable for employers to do this, however, employers should not adjust the pay periods more than one week. If an employee is injured on a Tuesday and the employer's pay periods are Monday through Friday, the 13 weeks could be adjusted back from Tuesday to the previous Friday to simplify the completion of the TWCC-3. The employer should not adjust the 13 weeks more than one week, even if the employee is paid once every two weeks or once per month.

Texas Labor Code Section 408.041 provides that the AWW is calculated using the 13 weeks immediately preceding the injury. Adjusting the TWCC-3 more than one week would mean that the 13 weeks immediately preceding the injury would not be on the form, rather the form would contain 13 of the last 14 weeks of wages which is not provided for by the statute. A TWCC-3 that has less than 13 weeks of wages, or that has had the 13 weeks adjusted more than one week should be considered invalid and the carrier should continue to use the information on the Employer's First Report of Injury, TWCC-1, until a properly completed wage statement can be obtained. Enforcement of this provision has not changed.

Note- The ability to adjust the 13 weeks is one of convenience to the carrier and the employer. If, at a dispute resolution proceeding, it is found that the adjustment produced a different AWW than that which is produced using the stricter standard, the carrier will be liable for this second, possibly higher amount.

TWCC-3 Completion - Fringe Benefits

The second major issue is related to the new TWCC-3 which requires employers to provide information on the amount of fringe benefits paid each week for the 13 weeks immediately preceding the injury (as above). The employer must indicate whether the employee received each of the fringe benefits listed on the TWCC-3 (page 3 of the form) during the 13 weeks immediately preceding the injury and if so, must indicate the weekly amount of fringe benefits received. The employer must provide this information regardless of whether the employer will continue to provide the benefits after the injury, and must indicate whether or not the benefits will continue to be provided after the injury for each of the fringe benefits listed on the TWCC-3. Therefore all of section 12 of the TWCC-3 must be filled out by the employer. Any TWCC-3 that does not contain complete information regarding fringe benefits should be considered invalid and the carrier should continue to use the information on the TWCC-1 until a properly completed wage statement is obtained.

Fringe Benefits and Calculation of the AWW and Compensation Rates

The third major issue involves calculation of the AWW. In calculating the AWW, many carriers do not include fringe benefits that were continued by the employer after the injury. If these benefits were later discontinued, the carrier would recalculate the AWW. This is incorrect. Appeals Panel Decision 93-683 maintains that unless an employee is a minor, seasonal employee, apprentice, trainee, or student, the AWW is a one time calculation.

Rule 128.1 provides that the market value of any non-pecuniary advantage that the employer continues to provide after the date of injury is not included in the calculation of AWW. Examples of non-pecuniary fringe benefits include, but are not limited to, meals, lodging, clothing, laundry, and fuel. However, health care premiums are included in the AWW, whether continued or not by the employer after the injury. This AWW is used to determine the employee=s average hourly wage.

Although pecuniary fringe benefits that are continued by the employer are used in the calculation of the AWW, these same continued benefits are also used in the calculation of the Temporary Income Benefits (TIBs) rate. Texas Labor Code Section 408.103 provides that the TIBs rate is a percentage (70% or 75%) of the employee=s lost earnings. Therefore, though continued pecuniary benefits are used in the calculation of and tend to increase the AWW, they are also subtracted from the AWW for the calculation of the TIBs rate.

Appeals Panel 95-1628 also discusses the proper method of determining the Impairment Income Benefits (IIBs) rate. The IIBs rate is not based upon lost earnings but rather on the total AWW. Per Texas Labor Code Section 408.126, a claimant's IIBs rate is 70% of the employee's AWW. It is therefore possible for an employee's IIBs rate to be higher than his/her TIBs rate. Consider the following examples:

Based on the TWCC-3, a claimant earned $200 per week for the 13 weeks immediately preceding the injury. In addition, the employer paid $40 per week in health care premiums for this employee during the same time frame. When the claimant lost time from work, the employer continued to pay the health care premiums.

The AWW is $240 for the calculation of all income benefits.

AWW = $240 but the employer continued to pay $40 per week in health insurance, TIBs = $150. [($240-40) X 75% = $150].

There is no similar adjustment for IIBs. IIBs are 70% of the AWW. Thus the IIBs rate would be $168 ($240 X 70%)

Based on the TWCC-3, a claimant earned an average weekly wage of $200 per week. In addition, the employer provided various non-pecuniary benefits including meals which had a fair market value of $30 per week during the same time frame. When the claimant lost time from work, the employer continued to provide the non-pecuniary fringe benefits.

Because the employer continued to provide the non-pecuniary fringe benefits, the AWW is $200 for the calculation of all income benefits.

Since AWW = $200, TIBs = $150. [$200 X 75% = $150].

IIBs are due at 70% of the AWW, therefore, IIBs = $140. [$200 X 70% = $140]

Employer Enforcement

The Commission already pursues violations for improperly completed forms. Compliance and Practices will begin to pursue violations for TWCC-3 forms that have improperly completed fringe benefits sections filed on or after December 1, 1996.

Carrier Enforcement

A carrier that uses an improperly completed TWCC-3 form and incorrectly determines the compensation rate commits an administrative violation of Section 409.023 of the Texas Labor Code for failing to pay compensation as and when it accrues. Further, a carrier that improperly calculates the compensation rate by failing to properly calculate the average weekly wage to include pecuniary fringe benefits commits the same violation. Compliance and Practices will begin to pursue violations for paying an improper compensation rate related to the three issues covered by this Advisory for TIBs and IIBs initiated on or after December 1, 1996. However, prior to this time Compliance and Practices will continue to pursue violations for other causes of improper compensation rate violations such as using a TWCC-3 that does not include 13 full weeks of wages.

Signed October 11, 1996

Todd K. Brown, Executive Director



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