If your Social Security claim is awarded, the amount you receive may be reduced if you received Workers’ Compensation benefits–whether or not the receipt of the Workers’ Compensation benefits was in a lump sum. Under the Social Security Act, Social Security Disability benefits may be offset if the disabled individual received workers’ compensation benefits. This is because Congress’ intent is to avoid duplicate benefits. As such, the statute places a ceiling on the disabled person’s combined Social Security disability insurance benefits and State workers’ compensation benefits. See 42 U.S.C. § 424a.
When a person receives both Workers’ Compensation benefits and Social Security disability benefits, the law is clear that their Social Security disability benefits “shall be reduced” to ensure that the sum of these benefits does not exceed 80 percent of your average earnings. See 42 U.S.C. § 424 a. The Supreme Court explained that by limiting total state and federal benefits to 80% of the employee’s average earnings, “it reduces the duplication inherent in the program and at the same time allows a supplement to worker’s compensation where their payments are inadequate.” Richardson v. Belcher, 404 U.S. 78, 83 (1971)
If you have a Social Security Disability claim and had a claim for Workers’ Compensation where you entered into a stipulation for Workers’ Compensation settlement, and was awarded a lump-sum amount, it may be possible that if the Social Security claim is subsequently approved, your receipt of the Workers’ Compensation lump sum payments may reduce the amount you get form Social Security disability benefits.
We review the language in the WC lump-sum settlement as it may prorate the lump sum settlement over the individual’s life expectancy thereby helping us determine whether or not Social Security benefits are reduced and by how much. The lump-sum is prorated to reflect the monthly rate that would have been paid had the lump-sum award not been made. Because there may be an offset with certain Social Security cases, it is imperative that you provide us with the necessary documents for us to review your case. We will ask about this information during our intake, case management reviews, and/or pre hearing conferences. We will ask if you received Workers’ Compensation benefits, approximate dates of receipt, and contact information for your Workers’ Compensation attorney as well as copies of the Workers’ Compensation Settlement documents. After we receive the documents requested form you, we will review the formula used by Social Security to determine the offset. While going over the offset formula is above the scope of this blog, it is worth mentioning that social security will use your highest years of earnings for their computations in determining the amount of reduction. Every case is different and not all cases will have an offset. However, since social security places a ceiling on the disabled person’s combined benefits, some cases will end up with an offset if the combined Social Security disability benefit and workers’ compensation benefit exceed 80 percent of the individual’s average monthly earnings.