Just like VHS tapes became obsolete with the rise of digital formats, paper checks are seen as outdated in the context of workers’ compensation.  In Pennsylvania, much like VHS tapes, paper checks are now on their way to becoming a relic.

Direct deposit of workers’ compensation payments, including settlement payments, is on its way and, in fact, a bill mandating direct deposit payments is anticipated to be signed into law in the upcoming weeks.  Prepare yourselves now to avoid the onslaught of Penalty Petitions that are sure to follow.

On Tuesday, October 22nd, the Senate unanimously agreed to the House’s amendments to Senate Bill 1232 (amending Section 308 of the Workers’ Compensation Act), meaning that the long-awaited Direct Deposit Bill is on its way to Governor Josh Shapiro’s desk.  Once delivered, Governor Shapiro will have 10 days to sign the Direct Deposit Bill, which will become effective 60 days afterwards.

Briefly, the Direct Deposit Bill will require all payments of workers’ compensation indemnity benefits (total disability benefits and partial disability benefits) and potentially settlement payments to be paid via direct deposit.  If someone does not have an account with a financial institution capable of accepting a direct deposit, insurance carriers and self-insured employers can continue to pay compensation by paper check.

The amendment to Section 308 will take effect in a two-tiered process.  The first tier, which will take place immediately after the effective date, permits an insurer or a self-insured employer to permit, or require, payment of compensation by direct deposit.  If the insurer or self-insured employer offers payment by direct deposit to any one person entitled to compensation, it has to offer it to all persons to whom it pays compensation.  The second tier occurs no later than one year after the effective date and requires all insurers and self-insured employers to offer payment of compensation by direct deposit.

In short, all insurers and self-insured employers will need to have a process in place within a year of the effective date of this amendment to offer direct deposit to every person entitled to receive workers’ compensation indemnity payments on a claim.

What do you as an insurer or self-insured employer need to do?

Well, the answer depends on what systems you already have in place.  If you have a system capable of direct deposit and are already offering it to everyone you pay compensation to, then you are ahead of the game.  If you have a system in place but are not offering it to everyone you pay compensation to, you should work toward offering it to everyone to whom compensation is paid and build that into your best practices because you will be required to do so under tier two.  If you do not have a system in place, that will need to be a priority to develop and implement.

What do you as an insurer or self-insurer need to do after your system is set up to offer direct deposit to everyone?

You need to notify the persons entitled to compensation on all claims, current and in the future, of the option (or requirement) to receive compensation by direct deposit.  If this notice is being provided on a new claim, it needs to be provided with the issuance of a Notice of Compensation Payable.

Notice has been provided, now what?

After notice is provided, the insurer or self-insured employer must provide a payment authorization form or direct the person to an online authorization form.  It is important to note that the insurer or self-insured employer shall not be required to pay compensation by direct deposit unless the person has submitted a valid payment authorization form or completed a valid online authorization form.  If the person does not submit the authorization, compensation is still payable by check, even if the insurer or self-insured employer requires direct deposit.

The Department of Labor and Industry (Bureau of Workers’ Compensation) has been tasked to develop and publish a standard payment authorization form to be utilized by all insurers and self-insured employers.  It is anticipated that this form will be available when this amendment takes effect; however, if not, our C&W attorneys can guide you in the design of your own form to use temporarily until such time that the official Bureau Form is made public.

A few additional notes regarding the amendment to Section 308:

An insurer, or self-insured employer, can utilize direct deposit for settlement payments but is not required to as settlement proceeds may still be paid by paper check.  Further, a payment made on a claim with an expected duration of 60 days or less may be made by paper check unless the insurer, or self-insured employer, agrees to make payment by direct deposit or the person previously received compensation by direct deposit and verifies that the account previously used is still valid.

While waiting for this amendment to go into effect, insurers and self-insured employers need to determine if they will permit or require the payment of compensation by direct deposit.  If yes, then notifications and payment authorization forms will need to be sent out to every person receiving compensation.  Our attorneys stand ready to assist you in the drafting of these two documents so you are fully prepared to address the anticipated onslaught of direct deposit requests by claimants and their counsel.  Please feel free to contact Deborah A. Beck, Esq. at dbeck@c-wlaw.com or by phone at (717) 390-3021 if you have any questions.

Disclaimer

The information in this article is provided for general informational purposes only and may not reflect the current law in your jurisdiction.  By reading this article, you understand that there is no attorney-client relationship between you and Cipriani & Werner, P.C. or any of our attorneys.  No information contained in this article should be construed as legal advice from Cipriani & Werner, P.C. or the individual authors.