In our last blog post about workers’ compensation, we looked at Social Security Disability Insurance (SSDI) benefits, and when injured workers were eligible for them. One thing that we mentioned but did not detail was what happened when you receive both workers’ compensation benefits and SSDI benefits.
The SSDI Offset
Injured workers can recover both workers’ compensation benefits as well as SSDI benefits. However, while workers’ comp is based on the severity of your injuries and your wage loss, SSDI benefits are need-based, based on your income before your disability. This means that there are circumstances where workers’ compensation benefits reduce your need for SSDI.
If this happens, the Social Security Administration (SSA) will reduce your SSDI benefits accordingly.
Under 20 C.F.R. § 404.408, your SSDI benefits cannot exceed 80 percent of your average pre-disability income. If your workers’ compensation benefits and your SSDI benefits would total more than that, your SSDI benefits would be offset, or reduced, until you only received the maximum amount.
Importantly, though, the SSA can only touch your SSDI benefits, not your workers’ compensation. If, for some reason, your workers’ compensation alone amounted to 95 percent of your average pre-disability income, the SSA could not reduce your workers’ compensation by 15 percent.
Calculating the Offset After a Lump Sum Settlement
The SSDI offset is fairly easy to calculate when you receive your workers’ compensation in monthly installments: The total amount of each installment cannot exceed 80 percent of the worker’s average pre-disability monthly wage. However, workers’ compensation cases in Missouri generally settle in a lump sum agreement under a Stipulation for Compromise Settlement. These settlements pay out all of the expected workers’ compensation benefits in a lump sum.
When this happens, the SSA will divide the lump sum amount into equal installments based on your life expectancy in order to determine how much the SSDI benefits have to be reduced in order fall below the 80 percent threshold.
For example, if your life expectancy is 240 months, or 20 years, and you settled your workers’ compensation case for a $120,000 lump sum, SSA will rephrase this amount as $500 per month in order to calculate the offset.
If the SSDI benefits need to be offset to bring your total compensation down to 80 percent of your prior wage, then they will continue to be offset until you either:
- Hit the total amount of the lump sum settlement, or
- Reach retirement age.
If you reach the total amount of the lump settlement, that means that you are no longer benefitting from your workers’ compensation settlement. Your SSDI has to be recalculated based on your new need, which can end the offset and increase your SSDI benefits.
If you reach retirement age, your SSDI benefits are turned from a disability payment into a retirement benefit.
St. Joseph Workers’ Compensation Lawyers at the Smith Law Office
If you are eligible for SSDI after suffering a disabling workplace injury, you will need to take the potential offset into account when pursuing workers’ compensation.
The personal injury and workers’ compensation lawyers at the Smith Law Office can help. Contact them online or call their law office at (816) 875-9373 for legal representation in St. Joseph, Kansas City, Springfield, or the rest of western Missouri.