A disability that keeps you from working can threaten your financial wellbeing and that of your family. Fortunately, state and federal programs such as workers' compensation and Social Security Disability Insurance (SSDI) can offer a much-needed safety net.
If you qualify for any of these programs, you are entitled to apply and receive the necessary benefits. However, in some instances, applying for both programs at the same time can affect the amount in benefits you receive.
Read on to learn more about how workers' compensation can affect your SSD benefits.
If you are already receiving workers' compensation, you can apply for SSD benefits too. However, the total amount you receive from workers' comp and SSD should not be more than 80 percent of what you earned before your disability.
If the total amount in benefits is more than 80 percent, Social Security will deduct your SSD benefits to bring the total amount to less than 80 percent of what you earned before your disability.
This process of reducing your benefits is known as offsetting and the amount deducted from your SSD is known as the offset. What you earned before your disability is your average current earnings.
Average Current Earnings
When you apply for SSD benefits while receiving workers' compensation, one of the things Social Security will look at is your average current earnings. Social Security uses one of several formulas to calculate your average current earnings.
Social Security may use your average monthly wages throughout your working life or the average monthly wages of the year, in the past five years, when you received the highest amount of wages. Alternatively, the SSA may take the average monthly wages of the five highest paid years of your working life.
To calculate the amount to deduct, Social Security will add the base amount of SSD you and your dependents would be entitled to receive due to your disability together with the amount of monthly workers' compensation you are receiving.
If this amount exceeds 80 percent of your average current earnings, Social Security will deduct the excess amount from your SSD benefits.
For example, say you earned $2,500 in monthly wages before your disability. After your disability, you began receiving $3,000 in workers' compensation and you and your family are entitled to $1,950 in SSD benefits.
The total amount of benefits you will receive per month is $4,950 ($3,000+ $1,950). This amount of benefits exceeds 80 percent of your average current earnings, $3,960 ($4,950 x 80 percent).
Your total benefits exceed 80 percent of your average current earnings by $990 ($4,950-$3,960). This means Social Security will deduct $990 from your monthly SSD benefits of $1,950, leaving you with $960 in SSD benefits per month.
Social Security will continue to make this deduction until the time you stop receiving workers' compensation payments or you retire, whichever comes first.
Your attorney can employ certain strategies that may help to minimize or eliminate the offset amount that Social Security deducts from your SSD benefits.
For example, you can settle for a lump sum workers' compensation payment and in your SSD application documents, your lawyer can indicate that the lump sum is payable over the duration of your lifetime.
This approach can reduce your monthly workers' compensation amount so that when this amount is added to your SSD benefits, the total does not exceed or only slightly exceeds 80 percent of your average current earnings, allowing you to minimize or avoid the offset.
The relationship between workers' compensation and SSD can be complex. You should certainly speak to an experienced lawyer who can guide you through these issues.
At Dean Law Firm LLC, we have over 35 years' experience helping our clients obtain the compensation they deserve. If you are feeling overwhelmed with your disability compensations, call us today to schedule a free consultation with one of our attorneys.