No: 02-2170 THOMAS F. SANFILIPPO v. Joanne B. Barnhart, Commissioner of Social Security

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No: 02-2170
THOMAS F. SANFILIPPO,
Appellant
v.
JOANNE B. BARNHART,
COMMISSIONER OF SOCIAL SECURITY
On Appeal from the United States District Court
for the Western District of Pennsylvania
District Court Judge: The Honorable Gustave Diamond
(D.C. Civil No. 01-cv-00283)
Submitted Under Third Circuit L.A.R. 34.1(a)
January 17, 2003
Before: ROTH, FUENTES, and ALDISERT, Circuit Judges
(Opinion Filed: February 4, 2003)
OPINION OF THE COURT
FUENTES, Circuit Judge:

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Pursuant to 42 U.S.C. § 405(g), Thomas Sanfilippo ("Sanfilippo") sought judicial
review in the United States District Court for the Western District of Pennsylvania of the
decision of the Commissioner of Social Security ("Commissioner") reducing his federal
disability insurance benefits under Title II of the Social Security Act ("Act") by the net
amount of a lump-sum workers' compensation settlement, prorated over a period of 4.3
years. Because we agree that the Commissioner's determination is a reasonable
interpretation of the Act and is not otherwise arbitrary or capricious, we affirm the Order
of the District Court granting summary judgment to the Commisioner.
I. Facts and Procedural History
On February 18, 1987, Sanfilippo, an arborist, suffered neck and back injuries while
working. On April 2, 1993, he filed an application for disability insurance benefits. On
May 28, 1996, an Administrative Law Judge ("ALJ") issued a decision awarding Sanfilippo
benefits under the Act. In accordance with 42 U.S.C. § 424a(a), the Social Security
Administration ("SSA") offset Sanfilippo's disability insurance benefits by $243.94 per
week ($195.15 per week after the deduction of attorneys' fees), the amount paid by his
employer pursuant to the Pennsylvania Workers' Compensation Act.
On July 7, 1998, the Pennsylvania Bureau of Workers' Compensation approved a
compromise and release settlement between Sanfilippo and his employer. Under the terms
of the settlement, Sanfilippo received a lump-sum payment of $55,000 and, in return,
agreed to waive and release his entitlement to all future indemnity, medical and other
benefits that might be available to him under the Pennsylvania Workers' Compensation Act.

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On October 23, 1998, SSA informed Sanfilippo that his disability insurance benefits
would continue to be reduced by $195.15 per week - the amount of the lump-sum payment
prorated over a period of 4.3 years. Sanfilippo requested reconsideration of this offset
determination, and, on May 3, 1999, SSA informed Sanfilippo that the reduction of his
disability insurance benefits was properly calculated.
At Sanfilippo's request, an ALJ held a hearing on December 20, 1999. The ALJ
granted Sanfilippo's request for leave to obtain additional information. On June 22, 2000,
Sanfilippo submitted an amended order from the Pennsylvania Bureau of Workers'
Compensation stating that the lump-sum payment of $55,000 represented payment in lieu
of compensation equal to $29.59 per week for a period of 1,487 weeks, which was
Sanfilippo's life expectancy. On July 17, 2000, the ALJ issued a decision reversing the
reconsideration determination and holding that Sanfilippo's lump-sum payment should be
prorated over his life expectancy rather than a 4.3 year period.
On September 8, 2000, the Appeals Council notified Sanfilippo that it was reviewing
the ALJ's decision under the error of law provision of 20 C.F.R. § 404.969. On December
7, 2000, the Appeals Council issued a decision reversing the decision ALJ. The Appeals
Council reinstated SSA's prior determination that Sanfilippo's lump-sum workers'
compensation settlement should be prorated at the periodic rate received prior to the
settlement. Pursuant to 20 C.F.R. § 404.981, the decision of the Appeals Council became
the final decision of the Commissioner.
On February 9, 2001, Sanfilippo filed a complaint in the United States District

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Court for the Western District of Pennsylvania, in which he challenged the decision of the
Appeals Council. On cross motions for summary judgment, the District Court granted the
Commisioner's motion for summary judgment. Sanfilippo now seeks appellate review of
the District Court's decision.
II. Jurisdiction and Standard of Review
This Court has jurisdiction over Sanfilippo's appeal pursuant to 42 U.S.C. § 405(g).
Our review of legal issues is plenary. Schaudeck v. Commissioner of Social Security, 181
F.3d 429, 431 (3d Cir. 1999). Our role is not to impose upon SSA our own interpretation
of the Social Security legislation. Rather, because Congress has delegated to the
Commissioner the responsibility for administering the complex programs, we must defer
to her construction, as long as it is reasonable and not arbitrary and capricious. Wheeler v.
Heckler, 787 F.2d 101, 104 (3d Cir. 1986).
III. Discussion
The issue before the Court on appeal is whether the Commissioner properly
prorated Sanfilippo's lump-sum settlement over a period of 4.3 years, or, as Sanfilippo
contends, the lump sum award should have been prorated over his life expectancy.
Sanfilippo argues that SSA's Program Operations Manual System ("POMS"), § DI-
52001.555C(4), is irrational, arbitrary and fails to approximate as nearly as practicable the
reduction of disability insurance benefits prescribed by 42 U.S.C. §424a(a).
Pursuant to 42 U.S.C. § 424a(a), the Commissioner is required to reduce, or offset,
the level of a recipient's social security disability payments when the total of that

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recipient's disability payments and workers' compensation benefits exceeds eighty percent
of his pre-disability earnings. When an individual's workers' compensation benefits are
paid in a lump-sum, the Act requires the Commisioner to prorate the lump-sum payment
and "approximate as nearly as practicable" the rate at which the award would have been paid
on a monthly basis. 42 U.S.C. § 424a(b). The Commissioner has developed internal
guidelines for calculating the rate by which lump-sum awards may be offset. These
guidelines list three steps, in priority order:
1. The rate specified in the lump-sum award.
2. The periodic rate prior to the lump-sum if no rate is specified in the lump-sum
award.
3. If workers' compensation, the State's workers' compensation maximum in effect
in the year of injury. This figure can be used if no rate is specified in the award
or there was no preceding periodic benefit.
POMS §DI-52001.555(c)(4).
In this case, the Commissioner ultimately concluded that the periodic rate paid prior
to the lump-sum settlement was the appropriate rate for offsetting the lump-sum amount
because the original compromise and release settlement did not specify an offset rate. The
Commissioner also found that "effect need not be given" to the amended order of the
Pennsylvania Bureau of Workers' Compensation "because it was amended solely to
circumvent the offset provisions." The District Court concluded that the Commissioner's
determination was a reasonable interpretation of the Act and we agree.
We owe great deference to the Commissioner's method for determining Sanfilippo's

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workers' compensation offset as the United States Supreme Court has "long recognized that
considerable weight should be accorded to an executive department's construction of a
statutory scheme it is entrusted to administer ... ." United States v. Mead Corp., 533 U.S.
218, 227-28 (2001) (quoting Chevron U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 844 (1984)). We find nothing unreasonable about the Commissioner's
actions in this case. Because there was no rate specified in the original agreement, the
Commissioner relied on step two of the lump-sum proration provisions and considered
Sanfilippo's prior periodic benefit rate. Considering Sanfilippo's weekly payment before
the lump-sum settlement produced a reasonable estimate of what Sanfilippo's future weekly
rate would have been had he not agreed to a lump-sum payment. We decline to conclude
that this method, or its application to Sanfilippo, is arbitrary and capricious.
Sanfilippo argues that the offset method contained in step two is irrational based on
this Court's decision in Sciarotta v. Bowen, 837 F.2d 135 (3d Cir. 1988). In Sciarotta, this
Court remanded to the district court to determine whether the Commissioner's assumption
that Sciarotta's lump-sum settlement represented his workers' compensation carrier's
determination that he would have received the maximum weekly benefit allowable under
New Jersey law was irrational. Id. at 140. On remand, the district court concluded that the
Commissioner's method to calculate the offset rate was irrational because the
Commissioner failed to provide a sufficient explanation regarding the use of the maximum
workers' compensation rate. See Sciarotta v. Bowen, 735 F. Supp. 148, 151-54 (D.N.J.
1989).

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Sciarotta provides no support for Sanfilippo's position because, as the District Court
in this case correctly emphasized, "Sciarotta dealt with the rationality of the use of the state
workers' compensation maximum as the calculation rate under the third step of the POMS
interpretive guidelines," not the second step. See also Rodlin v. Secretary of Health and
Human Services, 750 F. Supp. 146, 152 (D.N.J. 1990) (finding Sciarotta clearly
distinguishable because "Step 2 ... concerns the use of a previous periodic rate to prorate
the lump sum award, while Step 3 concerns the use of the maximum periodic rate in effect
in the year of injury.") In this case, Sanfilippo received prior periodic payments, a
circumstance specifically addressed by step 2 of the POMS guidelines. Case law dealing
with step 3 has no relevance to the issue before us.
Sanfilippo also argues that the Commissioner was bound by the amended order of
the Pennsylvania Workers' Compensation Bureau dated May 23, 2000, which stated that the
lump-sum payment "represents a payment in lieu of compensation equal to $29.59 per
week, for a period of 1487 weeks." Because the amended order specifies a rate based on
life expectancy, Sanfilippo asserts that SSA should have prorated his lump-sum settlement
pursuant to step 1 of the POMS interpretive guidelines. The District Court affirmed the
decision of the Commissioner to discount the amended order based on Social Security
Ruling 97-3, which states:
Based on section 224 of the Act, case law, and SSA policy, SSA is not
necessarily bound by the terms of a second, or amended, stipulation in
determining whether and by what rate a disabled worker's Social Security
disability insurance benefits should be offset on account of a WC lump sum
payment. SSA will evaluate both the original and amended stipulations and

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disregard any language which has the effect of altering the terms in the
original lump-sum settlement where the terms in the amended document are
illusory or in conflict with the terms of the first stipulation concerning the
actual intent of the parties, and where, as here, the terms of the amended
document have the effect of circumventing the WC offset provisions of
section 224 of the Act.
Social Security Ruling 97-3 (published 10/3/97).
We agree with the decision of the District Court. The amended order was issued
almost two years after Sanfilippo's original compromise and release agreement and the
terms, rights, and obligations of the settlement remained the same. The only change to the
original settlement was that the lump-sum amount was said to represent compensation of
$29.59 per week over the course of Sanfilippo's life expectancy. The terms in this
amended document "would have the effect of circumventing the WC offset provisions of
section 224 of the Act," the exact scenario that Social Security Ruling 97-3 was designed
to address and avoid. We find no legal error in the Commisioner's decision to not give
effect to the amended order.
IV. Conclusion
Accordingly, for the reasons stated above, we affirm the judgment of the District
Court.
_____________________________
TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.

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/s/ Judge Julio Fuentes
Circuit Judge

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