Social Security disability benefits are there to ease financial hardship caused by being disabled and unable to work. It frequently happens that someone qualifying for SSD also may be eligible for benefits through a workers’ compensation system. Should this happen to you, it is important that you know how workers’ compensation benefits and, more specifically, a workers comp settlement, may affect SSD.
How do workers’ comp and SSD work?
Workers’ compensation programs exist to pay benefits to state or federal employees for a work-related injury or illness. Benefits include the cost of medical care, replacement of wages for time lost from work due to the illness or injury, and when a worker does not fully recover, payment for long-term partial or full disability. The disability compensation an injured person receives from workers’ comp may be in the form of periodic payments or it may be a lump-sum workers comp settlement.
If you apply for or receive Social Security disability benefits, you must report payments you receive from any state or federal workers’ compensation program to the Social Security Administration in the same way that you must report other public disability benefits that you receive. Reportable public disability payments include:
- Civil service disability payments.
- Disability benefits are received through a state-funded program.
- Retirement benefits are based on a disability and paid through a state or local government.
Any benefits you receive from workers’ comp or other public disability programs when combined with your SSD benefits cannot be greater than 80% of the average current earnings you had before becoming disabled. Something to keep in mind is that some public benefits do not count toward the 80%. These include benefits paid by the Veterans Administration and through the Supplemental Security Income program.
Public retirement benefits that you receive from a state or local government do not always count toward the 80%. If you paid Social Security payroll taxes on your earnings, the benefits do not count against the 80%.
Should the total of your benefits exceed 80% of your average current earnings, your SSD payment is reduced by the excess amount in a process that Social Security refers to as “offset.” In other words, SSD pays you less each month because of the other benefits. No reduction takes place once you reach full retirement age because your Social Security disability benefits convert to Social Security retirement benefits.
How does SSD calculate average current earnings?
Average current earnings are calculated by Social Security using one of the following three methods:
- Your average monthly earnings for your five highest-earnings years.
- The average wage is used to determine the unindexed primary insurance.
- Average monthly earnings of your single, highest-earning year, which can either be the year of the onset of your disability or one of the five years immediately before it.
It gets complicated, so it is a good idea to consult with an NW Indiana and Chicagoland disability lawyer.
Lump-sum workers’ comp settlement
Instead of periodic payments, the workers’ compensation system through which you are entitled to receive benefits may offer to pay a lump-sum payment. The effect it has on your SSD depends on what is included in the payment.
As mentioned previously, periodic payments from workers’ comp count toward computing the amount of any offset against SSD payments. Some workers’ comp laws permit the workers’ compensation insurance carrier to settle a disability claim with an injured worker by offering a lump-sum settlement in exchange for the injured worker agreeing to forgo future monthly benefits.
Since SSD has no control over the right of a workers’ compensation insurance company to offer a settlement in place of future payments, Social Security converts the amount paid as a settlement into a monthly amount. It accomplishes this by dividing the lump sum by the amount paid monthly to the work before the settlement. The result is the number of months that Social Security will continue to count the workers’ comp toward the 80%.
If you receive a lump-sum settlement of a workers’ comp claim, you need to immediately speak with an experienced Social Security disability lawyer at the Scully Disability to have it reviewed to determine if some of it may be excluded from use in the offset calculation. For example, a settlement with workers’ comp may include amounts that can be excluded, such as legal fees, medical expenses, rehabilitation expenses, and allowances for anticipated future medical treatment.
Excluding them would lower the monthly amount used to determine whether there will be an offset. It could be that the terms of the lump-sum settlement are not clear as to what items are included, so your lawyer may need to produce documents to prove the intent of the settlement.
A skilled disability lawyer can help
If you are entitled to receive workers’ compensation because you suffered an injury or illness related to your work, the disability lawyers at the Thomas J. Scully III & Associates, LLC can advise you about the effect it may have on your SSD benefits. Their unsurpassed knowledge of all matters related to Social Security disability, including initial applications and appeals make them a trusted resource for advice, guidance, and outstanding representation.