• Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us
  • Facebook
  • Google+
  • Linkedin
  • Savvy
  • Twitter
  • Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us

Blog Post

Follow the money: How experts calculate lost earnings damages

17 Jun 2015
Comment are off
MBA Site Administrator
Lost Earnings in St Petersburg Florida

Plaintiffs seek damages for lost earnings in cases ranging from wrongful termination to wrongful death. When calculating such damages, financial experts consider several components, including base earnings, retirement benefits and fringe benefits.

Begin with base earnings

The initial focus in a lost earnings claim typically falls on the plaintiff’s base earnings — the earnings rate for a specified year from which lost earnings will be extrapolated. Your expert will need several types of data to compute a figure for base earnings, including:

  • Employer records,
  • Employee pay stubs,
  • Income tax records,
  • Social Security records, and
  • Census information or the earnings of comparable employees in the industry or company.

Information related to a plaintiff’s seniority, worklife expectancy, health history and declines in productivity can provide additional insight if his or her earnings record fails to show regular annual increases.

It also may be necessary to adjust for seasonal variations and sick pay. One-off, nonrecurring payments, such as a nonperformance-based bonus or a year with unusually high earnings, can skew base earnings, as well.

Review retirement plans

With defined contribution plans, the employer contributions are regarded as a portion of lost earnings in the years the contributions would have been made if not for the wrongful act. Instead of projecting the postretirement benefits to be paid, the expert calculates the sum of the employer contributions that would have been made.

When dealing with defined benefit plans, the expert may need to project the actual benefit stream following the plaintiff’s retirement. If the benefit depends on the worker’s earnings, the size of the loss will depend on the plan’s details, along with the plaintiff’s years of service, salary levels, expected retirement date and life expectancy.

Figure out fringe benefits

To determine compensation for fringe benefits, experts compare the benefits received before the alleged wrongful act to those received after, possibly taking into account the replacement cost of the lost benefits. (For example, individual insurance premiums usually are higher than those paid under a group plan.) Experts distinguish between benefits that depend on the recipient’s level of income and those that depend merely on being employed. Those that are triggered only by death or disability are removed from consideration.

Benefits to which both the employer and the employee contribute are closely examined. Because an employee’s contribution is deducted from lost wages, he or she would be doubly compensated if damages were paid for both the contribution and lost wages. Double-dipping also can happen if vacation and sick pay are included in cash earnings, or if fringe benefits such as health insurance are included in lost earnings when the plaintiff is also seeking compensation for specific losses, such as medical bills.

Dispel disputes

Lost earnings claims often involve contentious issues, such as the effect of variable compensation like commissions, overtime and performance bonuses. The proper loss period and discount rate also may be subject to dispute. Unemployment trends merit consideration, too. For example, how certain is it that the plaintiff would have maintained uninterrupted employment?

The plaintiff’s duty to mitigate the damages can raise additional questions. Defendants might argue that the plaintiff took an unreasonable period of time to find a new job or accepted a position at an unreasonably low pay rate. A vocational or employability expert can prove useful when making mitigation arguments.

The bottom line

Lost earnings claims often require far-reaching, complicated calculations. Attorneys should consult with their financial experts early in the process to ensure critical data is available to develop appropriate arguments.

© 2014

About the Author
McClanathan, Burg & Associates, LLC. is a full service accounting firm. Our team members provide services including: Tax, Audit, Assurance and Accounting, Estate and Trust, Forensic Accounting, Litigation Support and Business Valuation.

Social Share

  • google-share

Search

RECENT NEWS

  • IRS Extends the Tax Filing and Paying Deadline for Individuals
  • Do you know the tax impact of your collectibles?
  • Making 2017 retirement plan contributions in 2018
  • When an elderly parent might qualify as your dependent
  • AMT Calculations: It’s Showtime

Categories

  • MBA Events
  • MBA News
  • Opinion & Editorial
  • Resources & Tips

Archives

  • March 2021
  • February 2018
  • January 2018
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • November 2013

Social Media

Facebook
Linked In
SavvyCard
Twitter

“Best
Congratulations to this year's honored business!
Featured in the Tampa Bay Times.
Click here to view my profile >>

Categories

  • MBA Events
  • MBA News

Archives

Sign Up For Newsletter

First Name:
Last Name:
Email Address (required):
Company:
Phone Number:
© 2014 McClanathan, Burg & Associates, LLC | Website Design by ThinkTankConnect.com

Send to Mobile

Text or Email McClanathan, Burg & Associates online business card to your mobile device using the form below
From the card you will be able to:
  • Get turn by turn directions to the company's office
  • Access a visual company directory of employee cards
  • Call, email or text the company
  • Share/Refer the company to others
  • Save the card to your phone's home screen for future access