As social security disability benefits attorneys, we answer a number of questions from our clients about circumstances which can affect their benefits. One of the questions we hear most often is:
“How will a workers’ compensation claim affect my SSDI benefits?”
Unfortunately, there is no simple answer to this question. But the bottom line is that some workers who were injured or suffered an illness as a result of their employment will be eligible to receive both workers’ compensation as well as SSDI. However, there is a maximum amount of combined benefits that individuals are allowed to receive from both sources. In order to ensure that an SSDI/workers’ compensation recipient stays below the maximum benefit amount, the Social Security Administration (SSA) will offset that individual’s SSDI benefits. This process of reducing a worker’s SSDI benefit amount in order for the total SSDI/workers’ compensation benefits not to exceed the maximum allowable amount is known as a workers’ compensation “offset.”
The maximum total monthly amount of combined benefits that a recipient is allowed to receive under federal law is known as the applicable limit. A recipient’s applicable limit is calculated in one of two ways. It is the higher of either:
For most recipients, the higher figure will be choice a., 80% of the average current earnings; therefore, this is the figure that the SSA will most likely use when calculating your offset amount.
How does Social Security calculate average current earnings? It takes the highest one of the following three amounts.
For most SSDI recipients, the highest figure comes from c., the average monthly earnings from a single calendar year. Therefore, in order to calculate a recipient’s applicable limit, the SSA will most often calculate 80% of your average monthly earnings from a single calendar year, either the year you began receiving SSDI or one of the 5 years prior to that.
Once the SSA calculates 80% of your average current earnings, they will then look to see how much you are earning from your SSDI and workers’ compensation benefits combined. They then see if this amount is higher than your maximum benefit and, if it is, then they will reduce your SSDI benefits until your total benefit is the maximum allowed.
So, as an example, let’s say that in her highest year of earnings, Sara earned $2000 per month. She now receives $1300 per month in SSDI benefits and $800 per month in workers’ compensation benefits. Sara’s maximum benefit is 80% x $2000, or $1600. The amount she is receiving now is $1300 + $800 = $2100, or $500 more than she is allowed. Therefore, the SSA would reduce Sara’s benefits by $500 per month, bringing her SSDI benefit down to $800 per month. She would continue to receive this reduced amount until she reached full retirement age and began collecting social security retirement benefits.
In case you weren’t already confused by all of the information above, things get even dicier when it comes to lump sum workers’ compensation benefits. Let’s say Jim, 26 years old, is receiving $1500 per month in SSDI benefits. His maximum allowable benefit is $1600 per month. He receives a lump sum workers’ compensation award of $20,000. How will the SSA calculate whether, and by how much, his SSDI benefit should be reduced?
When a worker receives a lump sum workers’ compensation benefit, that benefit is usually accompanied by an agreement which outlines how that lump sum amount should be broken down. If it does not, however, then the recipient will suffer the consequences. The SSA, without appropriate language telling them how that benefit equates to a monthly amount, will be able to use their own formula to calculate the required offset. And the formula(s) used by the SSA are often not to the recipient’s benefit.
This is where having the expertise of a well-practiced attorney can make all the difference. Let’s say Jim’s attorney knew what he was doing, and he used his familiarity with the law (and with Jim’s individual circumstances) and included language in the lump sum agreement which said that the lump sum amount was calculated as $50 per month for 400 months ($50 x 400 = $20,000). Because Jim is receiving $1500 per month in SSDI benefits, and his maximum allowable benefit is $1600, then the SSA would not offset Jim’s SSDI at all. That’s because Jim’s new monthly benefit amount would be $1500 SSDI + $50 workers’ compensation = $1550, less than the maximum benefit of $1600. While many recipients are likely to have their SSDI benefits reduced by some amount, nearly all of them will have their benefits reduced by less if their workers’ compensation lump sum benefit agreement is written by a knowledgeable attorney.
The SSDI benefits application process is a stressful one. But if you have been injured or fell ill as a result of your employment and are therefore eligible for workers’ compensation benefits, the waters become even more murky. Because you have been injured and are unable to work like you used to, you need to be more mindful of your income and expenses than ever before. Hiring an experienced workers’ compensation and SSDI benefits attorney can help to ensure that you are collecting the maximum amount of benefits in order to help you and your family survive during this difficult time.