How to calculate interest on an award of benefits under workers’ compensation in Michigan.
The Michigan Legislature passed significant reforms in 2011. A change that did not get much attention involves how interest on an award is calculated. When weekly benefits are paid pursuant to an award, interest shall be paid at a rate calculated in the same manner as interest on a money judgment in a civil action under the Revised Judicature Act of 1961.
This is based upon 6-month intervals from the date of filing the Application for Hearing or Mediation at a rate of interest which is equal to 1% plus the average interest rate paid at auctions of 5-year United States treasury notes during the 6 months immediately preceding July 1 and January 1, as certified by the state treasurer, and compounded annually.
Unfortunately, the official WCA calculator does not include this functionality and it is an advertised limitation. Here is a sample calculation to do it manually.
Sample interest calculation
Mr. Smith is a factory worker who suffers a rotator cuff tear while lifting a heavy box. He has surgery and is unable to work for 6 months. The insurance company disputes the claim because an MRI shows preexisting degenerative arthritis.
Magistrate Jones awards 6 months of benefits from February 1, 2016 until August 1, 2016. The weekly comp rate is $500.00 based upon average weekly wage. Total comp owed is $13,071.43. Calculate simple interest by using the equation below.
Equation: I = Prt
I = Interest Amount
P = Principal Amount
r = Rate of Interest per year in decimal (R/100)
t = 6 month time period expressed in decimal (6 ÷ 12 = 0.5)
I = 13,071.43× 0.02337 × 0.5 =
I = $152.74
Total interest owed is $152.74.
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Photo courtesy of Creative Commons, by FutUndBeidl.Tags: Interest, Michigan workers comp lawyers, Wage Loss Benefits