How Does a Workers’ Comp Settlement Affect Social Security Disability?
Workers’ compensation systems exist to pay for medical care, lost earnings, and long-term disability attributed to injuries or illnesses related to the work you do. It is not uncommon for a person receiving benefits through workers’ compensation to also qualify for Social Security disability benefits either for the same or a different medical condition.
If you are applying for or already receiving payments through one of the Social Security disability programs, you need to be aware of how SSD benefits may be affected by a workers’ comp settlement. A general understanding of how the Social Security Administration treats benefits you receive from workers’ comp helps you to recognize when to consult a disability lawyer to protect your rights under what can be complex and confusing regulations.
What is workers’ compensation?
Before states passed laws creating worker’s compensation programs, workers suffering work-related injury or disease had to rely upon lawsuits and judges to compel their employers to pay for medical treatment. Workers’ comp laws prohibit most lawsuits by injured workers against their employers. In exchange, employers pay into a system providing insurance coverage to workers paying for their medical treatment, lost wages, and other expenses related to occupational injuries and diseases.
The goal of workers’ comp is to allow an injured or sick worker the care and time required to recover and return to work. The system also provides benefits for workers who do not make a full recovery. Instead of continuing to make periodic payments to a disabled worker, some workers’ comp programs allow the insurance company to pay a lump-sum settlement. This is unlike SSD where there is no provision for a Social Security disability settlement.
Whether you receive periodic payments or a lump-sum workers’ comp settlement, it may affect the payments you get from Social Security disability. You should also be aware that simply because you receive a one-time payment related to an occupational injury or disease, it may not be a settlement that affects your SSD benefits.
Social Security’s Rules Pertaining to Workers’ Comp Payments
When receiving disability payments from Social Security, you must report benefits you receive from other public benefit programs, including workers’ compensation, because they will reduce the amount paid to you by SSD. Three notable exceptions to the rule about other benefits reducing SSD are the following:
- Benefits from the Department of Veterans Affairs.
- Payments through the Supplemental Security Income program.
- Benefits from a state or local government-provided program in which Social Security taxes were paid from your earnings.
If the amount you receive from SSD plus payments you get from workers’ comp and other non-excluded public benefit programs exceeds 80% of your average current earnings, the payments you receive from Social Security will be reduced.
Social Security uses formulas to calculate your average current earnings. The following are three of the methods that are used:
- Calculate average monthly earnings from employment or self-employment for five consecutive years of your highest earnings.
- Average wage used in calculating the amount of the unindexed primary insurance.
- Average of the monthly earnings from your single highest-earning year, which can be the year you became disabled or any of the five years before it.
Regulations for whether and how benefits received from workers’ comp and other sources are offset to reduce the payments you receive from SSD tend to be complicated, but a disability lawyer can help show you how they apply in your situation.
Your workers’ comp settlement and Social Security disability offset
Periodic payments received from workers’ compensation may reduce Social Security disability payments, but what effect does a lump-sum payment received as a workers’ compensation settlement have on them? To answer the question, you first must identify the purpose of the lump-sum payment.
An insurance company may have the option under state law workers’ compensation law to offer you a lump-sum disability payment instead of making periodic payments. Acceptance of a workers’ comp settlement releases the insurance company from its obligations toward you regarding disability payments.
When you accept a lump-sum settlement, Social Security takes the amount that you receive from workers’ comp and prorates it as though it were paid in monthly increments. Those monthly increments are then used to calculate the offset against your SSD benefits. It is important to note that part of the comp settlement representing reimbursement to you for legal fees and medical expenses must be excluded before calculating the offset.
How can a disability lawyer help?
A consultation with a disability lawyer may offer advice and guidance that protects the rights you have under the law and SSD regulations. A lawyer can review any settlement you get from workers’ comp and make certain that offset calculations are done properly and only on the appropriate portions of the settlement.