| Legal Author: Travis Hansen, Esq.

Workers's Compensation & Social Security Disability Benefits

One Benefit Is Reduced - An Offset

General

Can I receive Social Security disability benefits and workers's compensation benefits at the same time? Yes, however for most worker's, there is a maximum amount of combined Social Security disability benefits and workers's compensation benefits that they can receive under federal law. Hence, one amount will be offset (reduced). Which amount is offset depends on whether you live in an 1) offset state, or a 2) reverse offset state.

Maximum Combined Benefit Amount

The maximum amount of combined Social Security disability and workers's compensation benefits you can receive is the higher of two amounts: 1) 80% of your pre-injury income called your "average current earnings" (ACE) amount, or 2) your total family monthly Social Security disability benefit amount. Nearly always, the higher of the two amounts is your ACE amount. Therefore, the maximum combined benefit amount of Social Security disability and workers's compensation benefits is usually your ACE amount.

How Your ACE Amount Is Determined

Your ACE amount is the highest of three amounts: 1) Your monthly Social Security disability insurance (SSDI) benefit amount called your primary insurance amount (PIA), 2) your average monthly earnings from your highest ever five years of earnings in a row, or 3) the average monthly earnings from your highest one year of earnings that occurred in the five years prior to your disability. Nearly always, the third amount is your highest amount, and therefore, it is usually how your ACE amount is determined.

Example

Let's put together what we have discussed so far and go through an example of how Social Security determines what your combined Social Security disability and workers's compensation benefit amount will be. Let's assume your maximum amount of combined Social Security disability and workers's compensation benefits is your ACE amount. Let's also assume that your ACE amount is the average monthly earnings from your highest one year of earnings that occurred in the five years prior to your disability. Let's further assume your income in the last five years is as follows:

Year 1 - 41,000,
Year 2 - 50,000,
Year 3 - 52,000,
Year 4 - 55,000, and
Year 5 - 53,000.

In this example, your highest yearly income amount in the last five years is $55,000. 80% (your ACE amount) of $55,000 is $44,000. Therefore, $44,000 is the maximum combined yearly amount of Social Security disability and workers's compensation benefits you can be paid. More specifically, $44,000 divided by 12 is $3,666. Hence, $3,666 is the maximum combined monthly amount of Social Security disability and workers's compensation benefits you can be paid.

Which Benefit Is Reduced - Workers's Compensation Offset & Workers's Compensation Reverse Offset

General

Again, for nearly all workers, the combination of Social Security disability and workers's compensation benefits will be more than the ACE amount, and therefore, either the Social Security disability benefit or the workers's compensation benefit will be reduced. Which benefit is reduced depends on the state in which you live. Thirty five states and two U.S territories have a workers's compensation offset which means your Social Security disability benefits are reduced. Fifteen states have a workers's compensation reverse offset which means your workers's compensation benefits are reduced.

Workers's Compensation Offset

35 States And Two Territories Reduce Your Social Security Disability Benefit Amount:

Alabama,
Arizona,
Arkansas,
Connecticut,
Delaware,
Georgia,
Guam,
Hawaii,
Idaho,
Illinois,
Indiana,
Iowa
Kansas,
Kentucky,
Maine,
Maryland,
Massachusetts,
Michigan,
Mississippi,
Missouri,
Nebraska,
New Hampshire
New Mexico,
North Carolina,
Oklahoma,
Pennsylvania,
Puerto Rico,
Rhode Island,
South Carolina,
South Dakota,
Tennessee,
Texas,
Utah,
Vermont,
Virginia,
West Virginia, and
Wyoming.

Example. Let's walk through an example of how a workers's compensation offset works (your Social Security disability benefits are reduced). You stop work October 1, 2019. You start receiving workers's compensation benefits March 1, 2020. You start receiving Social Security benefits September 1, 2021 after a long wait and a hearing. Social Security found you disabled starting October 1, 2019. You are owed Social Security disability back pay from March 1, 2020 to September 1, 2021 (Social Security has a five month waiting period before benefits start). Your workers's compensation amount is $2,400 per month, and your Social Security disability amount is $2,200 per month. Your ACE score is $3,666. Because the Social Security disability amount is reduced, you will receive $2,400 in workers's compensation monthly benefits, and you will receive $1,266 in Social Security disability monthly benefits for both your backpay months and future months ($3,666 - $2,400 = $1,266) .

Lump Sum Workers's Compensation Offset. If you are paid a workers's compensation lump sum payment, and you are paid by a state that reduces Social Security benefits (an offset state), Social Security will convert your worker's comp. Lump sum payment into monthly payments for the sake of a Social Security disability benefit offset/reduction. Social Security has several ways of doing this, but the most basic way is done in three parts. First, Social Security will determine your monthly worker's comp. amount. Second, Social Security will divide your lump sum by the number of months that constitute your lump sum. Third, Social Security will offset/reduce your Social Security disability benefit amount for each month your lump sum represents.

Lump Sum Workers's Compensation Offset Example. Let's walk through the first example discussed above except now in addition to receiving workers's compensation benefits, you have also received a workers's compensation lump sum.

You stop work October 1, 2020. You start receiving workers's compensation benefits March 1, 2020. On October 1, 2020, your worker's comp. ends, and you receive a $25,662 lump sum workers's compensation benefit payment. You start receiving Social Security disability benefits September 1, 2021 after a long wait and a hearing. Social Security found you disabled October 1, 2019. You are owed backpay from March 1, 2020 to Septemer 1, 2021.

As to the period you received monthly worker's comp. payments (March 2020 thru October 2021), you will receive $1,266 from Social Security ($3,666 - $2,400 = $1,266).

As to the October 1, 2020 workers's compensation lump sum payment of $25,662, Social Security will determine that this amount constitutes benefits owed to you for seven months - October 1, 2020 to May 1, 2021. Your $25,662 lump sum is divided by $2,400 (your previous workers's comp. monthly amount) - ($25,662 / $2,400 = 7). Again, your Social Security disability amount is $2,200 per month, and your ACE score is $3,666. Hence, from October 1, 2020 to May 1, 2021, your Social Security disability monthly amount will continue to be $1,266 ($3,666 - $2,400 = $1,266).

Starting May 1, 2021, Social Security will find that you are no longer receiving workers's compensation benefits, your workers's compensation offset will end, and you will thereafter receive Social Security disability benefits in the amount of $2,200 instead of the previous $1,266.

Workers's Compensation Reverse Offset

15 States Reduce Your Workers's Compensation Benefit Amount:

Alaska,

California,

Colorado,

Florida,

Louisiana,

Minnesota,

Montana,

Nevada,

New Jersey,

New York,

North Dakota,

Ohio,

Oregon,

Washington, and

Wisconsin.

Example. Let's walk through an example to see how a workers's compensation reverse offset works (your workers's compensation benefits are reduced).

You stop work October 1, 2019. You start receiving workers's compensation benefits March 1, 2020. You start receiving Social Security benefits September, 1, 2021 after a long wait and a hearing. Social Security found you disabled starting October 1, 2019. You are owed 15 months of Social Security backpay from March 1, 2020 to September 1, 2021 (you have a 5-month waiting period before your Social Security disability monthly benefits start). Your workers's compensation amount is $2,400 per month, and your Social Security disability amount is $2,200 per month. Your ACE score is $3,666. Because the workers's compensation amount is reduced, beginning September 1, 2021, you will receive $2,200 in Social Security disability monthly benefits, and you will receive $1,466 in workers's compensation monthly benefits ($3,666 - $2,200 = $1,466).

During your Social Security back pay period (March 2020 to September 2021), you received $2,400 monthly workers's comp. benefits. However, because you have now been paid Social Security benefits for the time period of March 1, 2020 to September 1, 2021, your workers's comp. amount is retroactively reduced. Therefore, you are now entitled to a $1,466 workers's compensation monthly amount from March 1, 2020 to September 1, 2021 ($3,666 - $2,200 = $1,466). Because you were paid $2,400 and for the months of March 1, 2020 to September 1, 2021 (18 months), and you are now entitled to $1,466 for those same months, you have now have a workers's compensation overpayment of $944 per month ($2,400 - $1,466 = $944). Workers's comp. will take $16,992 from your Social Security backpay amount ($944 x 18 months).

Notifying Social Security Of Workers's Compensation Benefits & Overpayment

You should notify Social Security that you have received or that you have begun receiving workers's compensation benefits. Social Security will usually know if you have received workers's compensation benefits, and it will offset benefits accordingly. However, sometimes it does not find out for a while. If Social Security pays you too much in benefits because it was unaware of your workers's compensation, an overpayment will occur (Social Security has "overpaid" you benefits). Social Security will recover this overpayment until the overpayment is recovered - usually by further reducing your monthly benefit amounts, or taking any eventual tax refund. A further discussion of an overpayment can be reviewed here: Overpayments

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