Often times a serious work related injury can prevent a person from ever returning to work. When this happens, it may be a good idea for that person to apply for social security benefits. However, it is important to note that any benefits you receive under a workers’ compensation claim can have an effect on your social security benefits.
First, what is the difference between workers’ compensation benefits and social security benefits? To begin with, workers’ compensation systems are state run programs, whereas Social Security is a federal program. Secondly, to qualify for workers’ compensation benefits, you need to show that you were injured in the course of your job. For social security benefits, it doesn’t matter where or how you were injured, but you have to prove that you are unable to work. Lastly, workers’ compensation programs usually pay different kinds of benefits, based on whether you are totally or partially disabled, and whether you are permanently or temporarily disabled. Social Security, on the other hand, pays two kinds of benefits. Under one, you must have enough work credits to qualify (credits are earned by working and paying into the system). Under the other, you must have a low enough income to qualify. Under both, however, you must
prove that you are unable to work due to a disability that has lasted or is expected to last for at least one year or to result in death. There are other differences, and the nuances of both of the systems are complex, which is why it is a good idea to hire an attorney if you plan to apply for either workers’ compensation benefits or social security benefits.
So what is the effect that your workers’ compensation benefits can have on your social security claim? The Social Security Administration will offset (reduce) your benefits by any money that you receive from workers’ compensation over a certain amount. Social Security will make this offset if the total social security benefits payable to you and your dependents plus your workers’ compensation exceed the higher of:
- 80 percent of your “average current earnings” before your disability began; or
- Your family’s total Social Security benefit (before the reduction).
“Average current earnings” is the highest of:
- Your average monthly wage upon which your un-indexed disability primary insurance amount is based;
- Your average monthly earnings from covered employment and self-employment during the highest five years in a row after 1950; or
- Your average monthly earnings based on the single calendar year of highest earnings from covered employment. This single calendar year can be the year that your disability began or any of the five years immediately preceding the year your disability began.
The offset of benefits continues until you turn either age 62 or 65 depending on your onset of disability and month of entitlement to benefits.
Furthermore, a settlement of your workers’ compensation claim can affect an offset of your social security benefits. The Social Security Administration may pro rate the amount of the settlement at the same rate that you were receiving Workers’ Compensation wage benefits before the settlement. The Social Security Administration applies either (1) the rate specified in the lump-sum award, (2) the periodic rate paid prior to the lump sum settlement, or (3) your state’s Workers’ Compensation maximum in effect for your year of injury.
What this means is that when you settle your workers’ compensation claim, the Social Security Administration may treat you as if you are receiving benefits at a high rate for the first few months or even years that you are entitled to social security benefits. This could negate a large portion of your benefits.
To address this problem, the Social Security Administration allows you to put language in your settlement agreement that essentially spreads the value of your settlement over your expected life time. Thus, the Social Security Administration will view your workers’ compensation benefits as being paid at a much lower rate than they were when you were receiving them, and therefore have less of an impact on your social security benefits. It is for this reason that it is very important to hire a knowledgeable attorney for both your workers’ compensation and your social security claims.