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North Carolina Court of Appeals Calls for Clarity on Whether Retirement Contributions Are Included in Calculating Workers' Compensation Benefits

    Client Alerts
  • November 16, 2007

The North Carolina Court of Appeals recently considered an issue of first impression regarding whether retirement plan contributions must be included when determining the amount of the workers’ compensation benefit payable to an injured employee.  The Court of Appeals reversed and remanded a finding by the North Carolina Industrial Commission (the “Commission”) that U.S. Airways did not have to include its contributions to a plaintiff’s 401(k) savings plan and pension plan when calculating the injured employee’s benefits.


In this case, a ramp worker for U.S. Airways suffered an injury to his back while lifting luggage.  When the employer filed its agreement for disability compensation, it omitted its contributions to the employee’s 401(k) account and pension benefit.  Inclusion of these contributions would have increased the employee’s “average weekly wage” by $51.87.  The Commission ruled that the employer’s retirement contributions should not be included in calculating the employee’s “average weekly wage.”  The Court of Appeals, however, reversed and remanded, holding that the Commission needed to reconsider the matter because the North Carolina Workers’ Compensation Act does not expressly exclude fringe benefits from an “average weekly wage” calculation.


The Court of Appeals instructed the Commission to evaluate on remand whether the present value of the retirement savings benefit can be readily converted into a cash equivalent to determine whether benefits should be included in the calculation of “average weekly wage.”  The Court reasoned that this analysis supports the basic purpose of North Carolina disability law to determine an amount that is fair to both the injured worker and the employer.  Finally, the Court called for North Carolina lawmakers to revisit and clarify the issues raised in this case, noting that other state legislatures have clarified their intent after state courts wrestled with how to treat fringe benefits under similar circumstances.