When injured workers in Nevada accept a lump sum payout for PPD benefits, the payment amount is reduced to reflect the present value of the award and claimants may be giving up important rights.
Are Nevada Lump Sum PPD Awards Fair?
Under Nevada law, lump sum permanent partial disability (PPD) awards are limited. The lump sum award is reduced to present value, which is the worth of all installment payments after they are discounted at a specified rate. In theory, if an injured worker does not touch his/her monthly or annual installments until age 70, the untouched total including interest would equal the total lump sum award. However, an examination of the total figures using an insurer’s calculation method shows a big discrepancy in totals between installment payments and a lump sum award. The total benefits award for installment payments is much higher than the lump sum total.
One problem with Nevada lump sum PPD awards is that the state has not updated the discount rate used to reduce total installment payments to present value lump sums in over 18 years. Since 1997, insurers have been allowed to take a huge discount at a 6 percent interest rate. This does not reflect changes in the economy or the cost of living in current times. A more realistic interest rate should be between 2.75 percent and 3 percent. Although Nevada law requires the state Division of Industrial Relations (DIR) to review the discount rate each year, there has been no review since 2000, so Nevada is still using a discount rating established in 1997.
Most workers who suffer serious injuries are forced to take lump sum PPD awards, rather than installment payments, to cover their expenses while out of work. Since injured workers only receive two-thirds of their average monthly wage when out of work, many go into debt trying to make ends meet. If the value discount rate is adjusted by DIR, installment payments may convert to a higher lump sum PPD award, but there is currently no decision to change the rate.
Permanent Partial Disability Payments
Permanent Partial Disability (PPD) payments are paid to injured workers with permanent impairments, but who are still able to work in some capacity. Once a workers compensation claim has been accepted, a worker can request installment payments or a lump sum payout of PPD benefits. If installment payments are selected, they are usually paid until the worker reaches 70 years of age. If a lump sum payout is selected, the following restrictions apply:
- Injuries on or after July 1, 2017 – If the worker’s disability rating is higher than 30 percent, the worker can receive the value of a 30 percent disability rating in a lump sum. The award for disability beyond the 30 percent will be paid in installments.
- Injuries on or after January 1, 2016 and before July 1, 2017 – If the worker’s disability rating is 30 percent or less, the worker can receive the entire award in a lump sum. If the disability rating is higher than 30 percent, the worker can receive the value of a 30 percent disability rating in a lump sum and the remainder of the award in installment payments.
- Injuries before January 1, 2016 – If the worker’s disability rating is 25 percent or less, the worker can receive the entire award in a lump sum. If the disability rating is higher than 25 percent, the worker can receive the value of a 25 percent disability rating in a lump sum and the remainder of the award in installment payments.
In Nevada, any portion of a lump sum PPD award is reduced to its present value using the state discount rate of 6 percent. This is based on the concept that a dollar received today is more valuable than dollars received in the future.
Disadvantages of Lump Sum PPD Awards
Once a worker agrees to a lump sum PPD award, he/she is agreeing to a final settlement that includes giving up certain rights under Nevada law:
- The right to receive future medical care for injuries
- The right to receive vocational rehabilitation services
- The right to reopen the workers’ compensation claim if the medical conditions change
- The right to contest certain penalties from the insurer
- The right to dispute the disability rating on the claim
In Nevada, some workers are eligible for vocational rehabilitation services following an injury. This includes job retraining, educational courses, and assistance in finding a new job. Depending on a worker’s disability rating, some workers are also eligible for bi-weekly maintenance payments while they are receiving vocational rehabilitation services for up to 18 months. When a worker agrees to a lump sum PPD award, he/she gives up vocational rehabilitation benefits in exchange for a lump sum payout.