What happened: Pennsylvania’s Commonwealth Court ruled 4-3 that employers cannot increase workers’ comp offsets based on Social Security cost-of-living adjustments.
Who’s involved: The Commonwealth of Pennsylvania as employer, the Workers’ Compensation Appeal Board.
What’s at stake: Whether employers statewide can claim 50% of every annual COLA increase, reducing injured workers’ effective benefits.
Why it matters: The ruling locks the offset at the initial Social Security benefit amount, shielding the only inflation protection available to injured workers.
Where it stands: Decided November 9, 2026, by a 4-3 panel; appeal to the Pennsylvania Supreme Court is possible.
Every time Congress approved a cost-of-living increase for retirees, this employer paid less in workers’ comp - taking half the bump as an offset.
A Pennsylvania appellate court just put a stop to it. The Commonwealth Court ruled 4-3 that employers cannot increase their workers’ comp offset to capture a share of Social Security cost-of-living adjustments. Handed down November 9, 2026, the decision is the first time a Pennsylvania court has addressed the question.
The employee was hurt on the job in 1997 while working for the Commonwealth of Pennsylvania. She began collecting Social Security retirement in March 2017, and her employer applied the standard 50% offset under the state’s Workers’ Compensation Act, cutting her weekly payments to $247.56.
Over the years that followed, each time Congress approved a COLA, the employer bumped up its offset by half the increase. She did not push back until 2023.
The question came down to one word in the statute: “benefits.” Does it include the federally funded inflation adjustment, or is the offset locked to the initial retirement amount?
The court said the statute was unclear on that point. The 50% offset was designed to reflect the employer’s share of Social Security contributions. But COLAs are funded entirely by the federal government, not employers. Federal regulations say the purpose is to “keep up with rises in the cost of living.”
Pennsylvania does not adjust workers’ comp for inflation. So allowing the increased offset would strip injured workers of half the only inflation protection they receive - while employers saved on contributions they never made.
No other state that has examined this question has allowed the offset. Courts in Colorado, Florida, Montana, and New Hampshire all reached the same conclusion. In one Colorado ruling, the court reasoned that “a cost-of-living increase does not result in a double award” because the federal government is simply preserving the purchasing power of Social Security payments.
Three judges dissented in two separate opinions. Both argued the law’s wording was clear and covered all Social Security benefits, COLA included, without exception. One also flagged an equity wrinkle: under the majority’s rule, two workers who start collecting Social Security a month apart could end up with different offset amounts.
The ruling applies from the employee’s 2023 challenge onward. Earlier offsets she did not contest remain in place.
For claims teams and insurers adjusting offsets in Pennsylvania, the practical effect is immediate: COLA increases are off the table.
