Can You Receive Workers’ Compensation Benefits and Social Security Disability Benefits at the Same Time?

You can collect workers’ compensation insurance and social security disability insurance at the same time, but there are some rules limiting the amount of money you can be paid.  

If you are receiving benefits from both sources, Social Security may reduce its payment to “offset” the amount covered by the workers’ compensation check.  In other words, your social security benefit will be less than what it would have been if social security were your only source of disability insurance.

Let’s first take a look at how the offset applies to monthly workers’ compensation payments. Federal law requires that total workers’ compensation, including employer-based workers’ compensation insurance and Social Security Disability Insurance, not go over 80% of the recipient’s average earned pre-disability income.  Don’t worry. The SSA calculates only your highest earning years in determining this average.

But let’s say your average pre-injury income turned out to be $5,000 per month.  The combined monthly compensation from both workers’ compensation insurance and Social Security would have to remain below $4,000 (80% of $5,000).  You’re simply not entitled to the equivalent of your full salary from the combination of these two benefits (private disability insurance, on the other hand, does not trigger the Social Security offset).

If workers’ compensation gave you $2,500 a month and your full social security benefit also amounted to $2,500, the total would match your average earned income of $5,000.  As a result, Social Security must cut its payments by $1,000 a month to meet the maximum 80% of salary required by law.  The total benefit ($2,500 from workers’-comp; $1,500 from Social Security) will equal $4,000, the very highest amount permitted to the worker.

Sometimes your attorney can negotiate a lump-sum settlement with your employer’s insurance company.  Under this kind of an agreement, the beneficiary gives up some workers’ compensation benefits in exchange for a one-time payment of cash.

The Social Security offset applies to these situations also, but the matter is a bit more complicated.  Let’s say you receive a $50,000 settlement negotiated by counsel, and before the settlement, your temporary workers-comp checks were $1,000 a month.   Social Security will regard the lump-sum of $50,000 as consisting of fifty monthly payments of $1,000 each and calculate the offset accordingly.  In other words, the lump-sum will be divided up as if it were a monthly payment over a fixed period of time (in this case, $1,000 a month for fifty months). (Medical and legal expenses incurred while negotiating the settlement are excluded from this calculation).

Social Security will continue to adjust its payments lower as if your workers’ compensation money were still coming in every month and triggering the offset.  To avoid this problem, you must insist on a “life-expectancy” clause within the negotiated settlement.  The effect of the “life-expectancy” language is to “stretch” the number of months the lump sum could be reasonably expected to cover in light of the probable life expectancy of the recipient.  Here is an example of how the life-expectancy clause might affect a real-life situation: If you’re 30 years old with a permanent disability and just won a $50,000 settlement from your employer, this one-time sum, under the life-expectancy clause, would now be expected to cover you for the rest of your natural life, not just 50 months.  So now Social Security will lower its assessment of your monthly workers-compensation check.  The $50,000 would have to last for many, many months, if it is to cover your whole life, and not just the 50 months mentioned in the first scenario.

This revised calculation of monthly workers’ compensation checks enables Social Security to increase its own contribution to the monthly total, in other words, to lower or to eliminate the offset altogether, which means larger social security checks for the recipient on top of the lump-sum negotiated by his attorney!

For further reading check out Social Security Benefits Offset and Workers’ Compensation Settlements

Articles contained here are not intended to provide legal advice, only providing general information. We encourage individuals to consult with an attorney regarding individual circumstances.