While you can collect Workers Compensation and SSDI at the same time, there are some advantages to applying for one before the other. Workers’ compensation benefits are paid to a worker because of a job-related injury or illness. They may be paid by federal or state workers’ compensation agencies, employers, or by insurance companies on behalf of employers. With that said, workers’ compensation may reduce your Social Security benefits. If you receive workers’ compensation or other public disability benefits, AND Social Security disability benefits, the total amount of these benefits can’t exceed 80 percent of your average current earnings before you became disabled. Therefore, if you are receiving Social Security Disability benefits and Worker’s Compensation benefits you should consult an attorney as explained below.
If the total amount of these benefits exceeds 80 percent of your average current earnings, the excess amount is deducted from your Social Security benefit.
Example: Before you became disabled, your average earnings were $4,000 a month. You, your spouse, and your two children would be eligible to receive a total of $2,200 a month in Social Security disability benefits. You also receive $2,000 a month from workers’ compensation. Because the total amount of benefits you would receive ($4,200) is more than 80 percent ($3,200) of your average current earnings ($4,000), your family’s Social Security benefits will be reduced by $1,000 ($4,200 – $3,200). Your Social Security benefit will be reduced until the month you reach age 65, or the month your other benefits stop, whichever comes first. Starting December 19, 2015, due to a change in the law, your benefits will continue to be reduced until you reach your full retirement age.
Social Security figures your average current earnings in one of three ways:
The Average Monthly Wage Formula: Social Security uses your average monthly wages to calculate your disability benefit amount.
The High-Five Formula: Social Security uses the average monthly wages from your five highest-paid consecutive calendar years.
The High-One Formula: Social Security uses the average monthly wages from the your single highest-paid calendar year during the previous five years.
The High-One formula is used in the vast majority of cases, although Social Security will use whichever method is most favorable to you. However your average earnings are calculated, if your SSDI monthly benefit and your monthly workers’ compensation benefit combined are higher than 80% of your average current earnings, the offset will apply. This is true for weekly worker’s compensation benefit checks, but in most cases, the offset can be avoided if you settle your worker’s compensation case using the proper (Not the division form) settlement form and language.
When a person receives a lump-sum settlement from workers’ compensation, an effective strategy for reducing the Social Security offset is to state in the settlement agreement that the lump sum is meant to be spread out over the rest of the individual’s life. Often this method greatly decreases the offset or even eliminates it entirely.
If you plan on receiving both Workers Compensation and SSDI, contact The Hines & Wilson Law Firm. We are experienced with working with claims involving workers’ compensation and SSDI. Contact us today for a free consultation. You can contact us at (573) 443-4500, our toll-free number (877) 473-4500, or email us info@hineslawfirm.com.
