The law provides for the following six types of settlements which must be approved by the Workers’ Compensation Commissioner. The Agreement for Settlement and Compromise Settlement are the two fundamental types of settlements. The four remaining types of settlements are used in conjunction with the Agreement for Settlement and Compromise Settlement. All settlements must be submitted on prescribed forms.
The Division of Workers’ Compensation will not approve a second compromise settlement for the approval of an MSA set aside. A file stamped addendum is all that will be accepted for filing. The addendum can then be attached to the original settlement and send to CMS. If a reliable source informs the division that CMS is not accepting that as compliant, the division will revisit the issue once what CMS actually requires is apparent.
Agreement Settlement (85.35, 86.13)
The parties may enter into an agreement resolving the amount and extent of compensation payment due. Next the settlement is to be filed with the Workers’ Compensation Commissioner. Approval of an agreement settlement by the Workers' Compensation Commissioner confirms the compensability of the claim and preserves the employee’s future rights.
Compromise Settlement (85.35)
When there is a dispute regarding the employee's entitlement to benefits, a compromise settlement may be filed with the Workers’ Compensation Commissioner. Approval of a compromise settlement ends both parties' future rights to any benefits for the settled injury.
Contingent Settlement (85.35)
Any settlement may be made contingent upon a specified subsequent event occurring. If a settlement is contingent on an expected event and that event does not occur, the settlement and its approval may be vacated. A contingent settlement is commonly used when a court or Medicare must also approve the settlement.
Combination Settlement (85.35)
A combination settlement establishes part of a claim as compensable using an agreement for settlement while disposing of the balance of the claim using a compromise settlement.
Lump Sum Payments
In Iowa, compensation for settlements are received in payments, lump sum payments are the exception. If approved by the Workers’ Compensation Commissioner, the law does allow for two types of lump sum payments in the form of commutations.
A commutation is a lump sum payment of future benefits. A commutation may be part of an agreement for settlement but may be used after an award is made in a contested case decision. In order for a commutation to be approved by the Workers’ Compensation Commissioner, it must:
- demonstrate the employee has a specific need for receiving a lump sum payment or future benefits
- ensure a lump sum payment of future benefits is in the employee’s best interest
There are subsequent filing requirements that must also be met before a commutation can be approved. When claim benefits are commuted, the amount of future benefits is discounted to the present value. There are two types of commutations:
Full Commutation (85.45, 85.47)
A full commutation is a lump sum payment of all remaining future benefits. When approved, a full commutation ends all of the employee’s future rights to any additional benefits, including medical benefits. (Appendix C)
Partial Commutation (85.45, 85.47, 85.48)
A partial commutation is a lump sum payment of a portion of the remaining future benefits. When approved, a partial commutation establishes the employee’s entitlement to disability benefits, but it does not end the employee’s future rights.
For Full Commutations and Partial Commutations filed after June 30, 2017, the employer and insurance carrier must agree to the commutation.