Office of Workers' Compensation Programs (OWCP)

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Division of Longshore and Harbor Workers' Compensation (DLHWC)

CHAPTER 3-502 — COMMUTATIONS

1. Purpose and Scope. This Chapter describes the procedures for processing requests for commutations.
2. Policy. The Longshore and Harbor Workers' Compensation Act Amendments of 1984 deleted section 14(j) from the Act. This section had provided the basis for commutations of LHWCA benefits. However, section 9(g) of the LHWCA, and section 2(b) of the Defense Base Act (DBA) provide for the commutation of benefits paid to aliens or non-nationals of the United States. Therefore, the procedures which follow apply only to the commutation of benefits paid under these sections.
3. General Information.
   1. Compensation for permanent total disability, permanent partial disability under section 8(c)(21) and death may be considered for commutations under section 2(b) of the DBA. However, section 9(g) of the LHWCA limits commutations to death benefits.
   2. Payment of a lump sum does not relieve the EC of the responsibility to furnish medical care which may be needed by the injured employee.
   3. No informal conference or formal hearing is required before a lump sum payment is authorized.
   4. The DD (on delegation by the Secretary of Labor) at his or her own option or upon application by the EC shall commute all future installments of compensation to be paid to aliens or non-nationals of the U.S., in the amount of 1/2 of the commuted future installments. In this instance, objection by the claimant is no bar to execution of the order.
   5. For commutations of LHWCA benefits under section 9(g), section 702.142(d) of the regulations provides that the commutation must be based on a compensation order that has fixed the right of the beneficiary to compensation.
4. Calculation of Commuted Payments. Lump sum amounts are calculated by the NO for disability and death cases. All calculations will be made using the most current United States Life Tables as developed by the Unites States Department of Health and Human Services. The discount rate to be used shall be equal to the coupon issue yield equivalent (as determined by the Secretary of Treasury) of the average accepted auction price for the last auction of 52 week U.S. Treasury Bills settled immediately prior to the date of submission of the commutation application, rounded to the nearest one-half percent.
5. Procedures for Lump Sum Payment.
   1. When the EC inquires into the possibility of concluding a case via a lump sum settlement, the DD will review the file to see whether the claimant's entitlement to compensation has been resolved and the weekly payments determined, as well as all issues resolved (see subparagraph 3e, above for the requirement of a compensation order in LHWCA cases).
   2. The DD will then refer the matter by memorandum to the Director, DLHWC for consideration, with a recommendation for approval. This memorandum must include:
      1. Full name(s) and birth date(s) of each claimant;
      2. Weekly compensation rate, including all past annual adjustments;
      3. The date through which accrued payments have been or will be made;
      4. A copy of the compensation order, where required (see subparagraph 3e, above); and
      5. If the claimant is receiving a compensation payment from the Special Fund; the amount paid from that Fund should be shown separately from that being paid by the EC.
   3. Upon receipt of the memorandum and the DD's recommendation, the Director will review the matter and, if in accord with the recommendation, will perform the necessary calculations. The Director will refer the matter back to the DD for the issuance of a compensation order.
6. Issuance of Compensation Order. When the Director provides the DD with the commuted value, the DD will issue a compensation order defining the terms of the lump sum. Upon payment of the lump sum, the case file may be closed subject to the need for further medical care in a disability case.
7. Compulsory Nature of Commutation. When an application for a lump sum is submitted by an EC under section 2(b) of the DBA, or section 9(g) of the LHWCA, neither the DD nor the Director, DLHWC may refuse approval. Payment as requested (based upon correct calculations) is mandatory.