Workers Compensation Offset and Disability

The Workers Compensation Offset and Disability

Disabled individuals who have also suffered work-related injuries should be aware of the “Workers Compensation Offset”.  The Workers Compensation Offset may reduce available disability benefits, affect future Social Security Disability Insurance benefits, and can potentially be made better by crafting settlement documents properly.

What is the Workers Compensation Offset?

In plain language, an individual who receives both Workers Compensation and Social Security Disability payments beyond a certain amount will have their benefits reduced.  This happens when SSD + WC payments equal an amount in excess of 80% of past average earnings OR in excess of one’s total family Social Security benefit.  The reduction in benefits will be an amount designed to reduce total compensation to a value below the higher of those amounts.

What Triggers the Workers Compensation Offset?

According to the Social Security Handbook §504.2, this reduction can occur at any point for benefits received before age 62 or 65, and only applies if total benefits payable to the disabled individual (and dependents) under the Social Security Act plus Workers’ Compensation (plus any public disability benefits, if applicable) exceed the higher of:

  • 80 percent of “average current earnings,” defined in §504.3 as the highest of three possible values to compute average income before one’s disability began; or
  • the “total family benefit,” which is one’s family’s total Social Security benefit before the reduction, on the first month that the individual also receives Workers’ Compensation or public disability benefits.

The offset of benefits continues until the individual turns either age 62 or 65 depending on onset of disability and month of entitlement to benefits.  It should be noted that per §504.7, this reduction only applies the month that an individual receives both Social Security Disability benefits and Workers Compensation Benefits / public disability benefits.

Per §504.7, the offset is then calculated by determining the higher of 80 percent of “average current earnings” vs. one’s “total family benefit,” the higher of which is called the “applicable limit.”  Social Security Disability benefits are then reduced when the total of one’s monthly Workers Compensation benefit plus any public disability benefit received exceeds the “applicable limit”.  This reduction to Social Security Disability Benefits is such that the combined income from Social Security Disability, Workers Compensation, and any public benefit does not exceed the applicable limit.

Unfortunately, these offsets happen more often to those who earned lower incomes when they were working.  This is because lower paid workers have lower applicable limits and more easily exceed their thresholds when combined Social Security Disability and Workers Compensation benefits start.

Are There Ways to Avoid The Workers Compensation Offset?

Individuals receiving Workers Compensation should be wary that receiving a lump sum Workers Compensation settlement will not avoid the problem of the Workers Compensation Offset.  Social Security has methods of converting a lump sum settlement to its equivalent monthly payment in order to perform the above calculation.  However, by requesting that one’s Workers Compensation attorney properly draft their settlement agreement to maximize disability benefits, some of the negative impact of the Workers Compensation Offset may be reduced.

A Workers Compensation Attorney will be able to strategize as to the method of reducing any Workers Compensation Offset that workers compensation payments may visit upon Social Security Disability payments.  Strategies employed may involve having larger amounts of workers compensation become payable after age 65 and having medical and legal expenses excluded from a lump sum workers compensation amount for the purposes of calculating the potential Social Security Disability offset.  An experienced and local Disability Attorney should work with the Workers Compensation attorney to strategize on benefits maximization, and readers should note that these strategies likely vary from state by state.

Georgia readers who are encountering this issue or other disability related issues should contact The Law Firm of O’Brien & Feiler to consult with an attorney at no charge.  To read more about this subject and others, visit The OBF Knowledge Base.

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