Question:

Please help. I need to calculate my fees. My client is male with Date of Birth of 2/21/43. PD is 79% payable at $230/week starting 12/8/03 (equal to $116,725.00). A Life Pension is thereafter payable at the rate of $73.44. Also, Applicant is to receive a Communtation of $10,000.00 when the Stipulated Award is approved (assuming in this example 6/30/04).

What is my fee?

Answer:

There are several calculation steps you need to take to determine your fee, and what the commutation balance is going to be for your client.

Here are the steps:

Fee on Base PD

First, we are going to assume 12% fee. If different, then substitute the appropriate number along the way.

The first part of your fee is 12% of the base PD. We need to determine the present value (at the generally accepted investment rate at this time of 3%) of that portion of $116,725.00 that is yet to be paid as the Award will be paid out over time (507.5 weeks). A portion of that Award, 29.14 weeks, has already been paid: 12/8/03 to date of commutation, or 6/30/04, for a total sum of $6,702.20, which is not reduced. The balance (507.5 weeks minus 29.14 weeks, or 478.36 weeks) must be reduced to present value.

Using the Present Value: PD, Medical, Other calculator, we get a present value of the Award of $96,156.92. The combination of the amount of Award already paid and the present value of the balance equals $102,859.12. A 12% fee of the base PD Award reduced to present value is $12,343.09.

Fee on Life Pension

Next we need to figure out 12% of the life pension. To do this we need to figure out the present value based on US Life Tables for life expectancy. The first course of action is to figure out when the life pension payments begin. Using the Future Dates/Days Between Dates calculator (after computing the number of days in 507.5 weeks = 3552.5 days) we get a start date for the LP of 03/21/2013.

Next, go to Present Value: Life Pension/100% Award on the Calculators page. Then click on "click here to calculate life expectancy". The client as of 3/21/13 is 70 years old (2013 - 1943). Enter that in the field and click Compute - the screen goes back to the present value screen with the life expectancy of 12.7 years.

Now fill in the LP weekly award rate of $73.44, ensure the default 3% Annual interest rate is present (note that a higher rate of return, or interest rate, will REDUCE the net present value output), and click on Compute - The present value is $40,431.43 and 12% of that is $4,851.77, for a total fee request of $17,194.86.

Commutation

The next step is to calculate the commutation as of 6/30/04, the date of the commutation.

Go back to the Calculators menu and choose Commutation of Life Pension. We are assuming in this example that the DOI is BEFORE 1/1/03 - LPs on injuries after 1/1/03 are entitled to an annual upward adjustment of the weekly rate based on the difference increase in the state average weekly wage as determined by the US DOL after 1/1/04. Click on For Injuries occurring BEFORE 1/1/2003 - click here.

The following data will be entered into the corresponding fields:

Date of birth: 02/21/1943
Injury date: 06/01/2002
Date of commutation: 06/30/2004
Life Pension Rate on the DOC: 73.44
Lump sum to be paid on DOC: $27,194.86 (17,194.86 + applicant's lump sum of $10,000)
Male
(Note that PD Commencement and Total weeks of PD are unnecessary for this calculation.)

Click on the Computation 3 button ("Commutation of Potion of Remaining LP after LP Commencement by Uniform Reduction of LP Payments")

The result is:

Exact Age: 61.356
Present Value of Life Pension as of exact age on DOC: 675.52
Amount of reduction in LP rate necessary to pruduce desire lump sum: $40.25
Life Pension after commutation: $33.19

By Peter Betlinski, Chief Engineer, workcompcentral.com

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