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Division of 
Workers'
Compensation


Workers' Compensation
Settlement Explanations

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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 other four types are used in conjunction with them.  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 for Settlement (85.35, 86.13)
The parties may enter into an agreement as to the amount and extent of compensation payment due and file it with the Workers’ Compensation Commissioner. Approval of an agreement for settlement confirms the compensability of the claim and preserves the employee’s future rights.

Compromise Settlement (85.35)
When there is a dispute about 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 the expected 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, lump sum payments are the exception and not the rule when compensation is awarded. The law does, however, provide for two types of lump sum payments in the form of commutations, if approved by the Workers’ Compensation Commissioner. 

Commutation
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 be shown that the employee has a specific need and that the lump sum is in the employee’s best interest. There are several other filing requirements that must be met before a commutation will be approved. When commuting benefits, the amount of the future benefits is discounted to 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.


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