On October 29, 2024, Governor Josh Shapiro signed Act 126 into law after it passed both the Pennsylvania State House and Senate with strong bipartisan support. This new law represents a significant modernization of the Pennsylvania Workers’ Compensation system by introducing the option for injured workers to receive workers’ compensation payments via direct deposit rather than relying solely on paper checks.
This change is a crucial step forward for Pennsylvania’s injured workers, many of whom have historically faced frustrating delays, lost checks, or administrative errors associated with receiving paper payments through the mail. By embracing digital payment methods, Act 126 aims to streamline the payment process, ensuring injured workers can access their benefits quickly and reliably.
Why Act 126 Matters for Injured Workers in Pennsylvania
Act 126 brings important updates to the way workers’ compensation benefits are paid in Pennsylvania. Until now, most injured workers relied on paper checks, which can be delayed due to postal issues or administrative mishaps. Lost checks, mailing errors, and delays in postal service have long been a source of stress for injured workers who depend on timely benefits to pay for essential expenses like medical treatment, housing, and groceries.
With Act 126, the Pennsylvania Workers’ Compensation system is moving into the digital age by allowing for direct deposit payments. This shift not only increases convenience but also enhances financial security and predictability for injured workers.
Key Features of Act 126: Direct Deposit for Workers’ Compensation Benefits
Some of the most significant provisions under Act 126 include:
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Duration Threshold for Direct Deposit Eligibility
Payments for a workers’ compensation claim expected to last 60 days or less may continue to be issued via paper check. However, any claim lasting more than 60 days—or reasonably expected to do so—is now eligible for direct deposit. -
Options for Workers Without Bank Accounts
If an injured worker does not have a bank account or credit union account capable of receiving direct deposits, insurance carriers or self-insured employers must continue sending paper checks. This ensures that workers without access to banking services are not left out of the benefits system. -
Timeline for Changes to Direct Deposit
Workers who opt for direct deposit can start, stop, or change their direct deposit instructions. However, these changes must be processed within 45 days of the worker submitting the necessary authorization forms. -
Limits on Changes
Injured workers are allowed to change the account where their benefits are deposited, but only twice per year. This restriction helps prevent administrative complications and potential fraud. -
Direct Deposit Cannot Be Split
Under Act 126, injured workers cannot split their direct deposit payments between multiple accounts or different payment methods. All benefits must go into a single account designated by the worker.
Important Caution: Accurate Direct Deposit Information Is Critical
Act 126 emphasizes the responsibility of injured workers to provide accurate bank account information when setting up direct deposit for their workers’ compensation benefits. The law clearly states:
“An insurer or a self-insured employer shall not be responsible for repaying any money deposited into an incorrect account if the sole reason for the error is incorrect information provided by the person entitled to receive compensation. An insurer or a self-insured employer shall take reasonable actions to attempt to recover the money and any money later recovered by the insurer or self-insured employer shall promptly be credited to the person entitled to receive compensation.”
This means workers must ensure that their direct deposit authorization forms are filled out clearly and correctly to avoid payment errors that could delay much-needed benefits.
Exceptions for Lump Sum Payments
While Act 126 expands direct deposit for routine benefits payments, it makes a specific exception for lump sum payments tied to Compromise & Release (C&R) settlements. These payments, which resolve workers’ compensation claims entirely, are still typically issued via paper check unless both the insurance carrier (or self-insured employer) and the injured worker agree to handle them through direct deposit.
Timeline for Implementation of Act 126
Although Act 126 officially became law on October 29, 2024, it went into effect 60 days later, on December 29, 2024. However, the transition to mandatory direct deposit is phased in:
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For the first year following the law’s effective date, direct deposit remains voluntary. Injured workers can choose whether to participate.
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Beginning on December 29, 2025, all insurance carriers and self-insured employers in Pennsylvania must offer direct deposit for eligible workers’ compensation benefits.
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After that date, accepting direct deposit will become mandatory for injured workers who have the ability to receive it.
Insurers Must Notify Injured Workers
A critical part of Act 126 is ensuring that injured workers know their rights. Insurance carriers or self-insured employers are required to notify injured workers of their right to receive workers’ compensation payments via direct deposit. This notice must be sent either:
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Immediately when the insurer or employer first has the capability to offer direct deposit, or
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Concurrently with the issuance of the Notice of Compensation Payable (NCP)—the official document in Pennsylvania workers’ compensation cases that confirms the insurer or employer accepts responsibility for the claim.
What Injured Workers Should Do Next
If you’re an injured worker in Pennsylvania, understanding Act 126 can help you make informed decisions about how you receive your workers’ compensation payments. Choosing direct deposit may reduce delays, prevent lost checks, and provide faster access to your benefits.
However, it’s crucial to ensure all forms are completed accurately, and that you know your rights under the new law. For personalized guidance, consider speaking with an experienced Pennsylvania workers’ compensation attorney who can help protect your rights and ensure you receive your full benefits under Act 126.
At YCL Law, we help injured workers navigate the complex world of Pennsylvania workers’ compensation law. If you have questions about Act 126, direct deposit, or your benefits, reach out to us today for a free consultation. Your financial stability and recovery matter.