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Workers' Compensation FAQ

The Interaction between Workers' Compensation and Social Security Disability Benefits

If you received an injury or occupational disease at work, you are probably eligible for workers' compensation benefits through your state government. Depending on the circumstances of your injury or disease, you may also qualify for federal Social Security Disability Insurance benefits (SSDI). This article will explore briefly how these two types of benefits interact.

Each program has its own set of qualifying criteria and definition of "disability." Workers' compensation programs differ slightly from state to state, but in very basic terms, almost all work injuries and occupational diseases fall under workers' compensation. Workers' compensation programs recognize both temporary and permanent injury and disease. SSDI benefits require that you have a disability expected to last at least a year or to result in death that prevents you from working, although SSDI benefits do not have to be related to work. Most people that qualify for both workers' compensation and SSDI have serious and long-term work-related disabilities.

In an effort to prevent beneficiaries from collecting excess monthly public benefits, the Social Security Act contains a workers' compensation offset provision (42 USCA 424a) requiring that, in certain circumstances, SSDI monthly benefits be reduced in part or in full by the amount of workers' compensation received and sometimes also by the amount of other types of public disability benefits. The formula applied is fairly complex. Here are some important considerations:

  • The offset provisions do not apply after the beneficiary reaches either age 62 or age 65, depending on the individual situation.

  • The offset kicks in only to the extent that the sum of the beneficiary's SSDI amount plus his or her workers' compensation amount exceeds 80 percent of average current earnings (ACE).

  • Before computing the offset, the Social Security Administration (SSA) must exclude from the workers' compensation award amounts for legal fees, rehabilitation, past and future medical costs, dependents' payments, and payments for specific loss.

  • The offset provision reaches both monthly workers' compensation payments and lump-sum worker's compensation settlements, which are prorated to arrive at monthly benefit approximations for offset purposes.

  • If the beneficiary successfully sues a third party for the work-related injury, the workers' compensation insurer usually has the right to reimbursement from the award for workers' comp benefits it paid. If SSDI benefits were previously reduced because of those workers' compensation benefits that were later reassigned to the insurer, those SSDI benefits should be restored.

Social Security law makes an exception to its offset requirement if a state has a recognized reverse offset provision, where the state requires reduction of the monthly workers' comp award if the beneficiary is also receiving SSDI. Basically, federal Social Security law requires an offset of SSDI against state workers' compensation payments, unless the state has a reverse offset provision that reduces the workers' comp award instead. The beneficiary will not be allowed to collect public monies twice to supplement lost income, but the federal law basically says that it will reduce its benefit unless the state wants to do so instead. Note: SSA only recognizes certain state reverse offset provisions, depending on when they were enacted and when the disability began.

This article provides a simplified summary of SSDI/workers' compensation setoff, an area of the law that is detailed, complex, and prone to frequent change. An attorney knowledgeable in both workers' compensation and in Social Security law can advise you about important nuances of the law that may be important to your case. It may be to your financial benefit to obtain advice from a lawyer if you are facing these issues, particularly if you are contemplating accepting a lump-sum settlement in your state workers' compensation case.

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