We are often asked how Social Security Disability benefits are impacted by a workers’ compensation settlement. Many of our clients are concerned that they will lose their right to their social security disability benefits.
In fact, an experienced attorney may actually be able to increase your Social Security Disability benefits if you settle your workers’ compensation case. A skilled attorney would use what we call “Spread Language” to have your workers’ compensation settlement prorated over the remainder of your life expectancy. You would still receive your settlement money all at once, but for Social Security purposes the settlement would be considered as payment over the rest of your life. This is perfectly legal, however, the attorney handling your matters must understand how to properly word the workers’ compensation settlement document.
Remember that if you are receiving both Social Security Disability and workers’ compensation benefits, the Social Security Administration has the right to reduce the monthly amount that you receive in SS disability payments. Between workers’ compensation and Social Security Disability benefits, the Social Security Administration will allow you to collect 80% of your “Average Current Earnings.” Any combination of workers’ compensation and Social Security Disability benefits that exceeds 80% of your Average Current Earnings will be deducted from your Social Security Disability benefits. The Social Security Administration calculates your Average Current Earnings based on your wages in the years before your onset of Social Security Disability.
However, if you settle your workers’ compensation case you can often use that 80% Average Current Earnings threshold to your advantage, increasing your disability benefits.
To better understand increasing your Social Security Disability Benefits, look at the following example:
• You are a construction worker who has suffered a serious injury to your lower back
• Your lower back injury prevents you from lifting more than 10 pounds
• You are 58 years old and your employer cannot accommodate your restrictions
• Your Social Security Disability Average Current Earnings are $4,000.00 each month
• Your workers’ compensation benefits each month are $2,668.00
• You are eligible to receive $2,000.00 a month in Social Security Disability benefits
• Your monthly Social Security Disability benefits are being reduced to $532.00 each month
• Your workers’ compensation case settles for $250,000.00
• After attorney’s fees of 20% or $50,000, the settlement in your pocket is $200,000.00
• Your Life Expectancy is 24 years or 288 months (This information comes from the National Vital Statistics Report)
With an attorney knowledgeable in both workers’ compensation and Social Security Disability issues, your monthly Social Security Disability benefits could be increased from $532 to the your full eligibility amount of $2,000.00. This would give you an additional $17, 616.00 a year in your pocket.
How did the attorney increase your Social Security Disability benefits? By spreading your settlement of $200,000.00 by your life expectancy of 24 years or 288 months. The settlement of $200,000.00 can then be considered $694.44 each month in workers’ compensation benefits (288 x 694.44 = $200,000.00). Remember Social Security allows you to recover 80% of your Average Current Earnings of $4000.00 or $3,200.00. Your $2000.00 in Social Security Disability benefits added to your $694.44 in spread workers’ compensation benefits is still below the 80% threshold so there is no reduction.
While these calculations may appear simple, there are many potential pitfalls. If the workers’ compensation settlement is not spread, your Social Security Disability benefits could actually be reduced by a greater amount. Medicare’s interests must also be considered in any Workers’ Compensation settlement when you are Medicare eligible and in many cases money must be put aside to satisfy Medicare’s interests.
We always recommend using an experienced lawyer to guide you through this process.