Workers' Compensation and Social Security Disability Benefits

Workers' compensation provides benefits to workers who are injured on the job or have a work-related illness. Benefits include medical treatment for work-related conditions and cash payments that partially replace lost wages. Temporary total disability benefits are paid while the worker recuperates away from work. If the condition has lasting consequences after the worker heals, permanent disability benefits may be paid. In the case of a fatality, the worker's dependents receive survivor benefits.

Although Social Security disability benefits and workers' compensation are the nation's two largest disability benefit programs, the two programs are quite different. Workers are eligible for workers' compensation benefits from their first day of employment, but Social Security disability benefits are paid only to workers who have a substantial work history. Workers' compensation provides benefits for both short-term and long-term disabilities and for partial as well as total disabilities. These benefits cover only disabilities arising out of and in the course of employment. In contrast, Social Security disability benefits are paid only to workers who have long-term impairments that preclude any gainful work, regardless of whether the disability arose on or off the job. By law, the benefits are paid only to workers who are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that is expected to last at least a year or result in death. The impairment has to be of such severity that the worker is not only unable to do his or her previous work but is also unable to do any other type of substantial gainful work. Social Security disability benefits begin after a 5-month waiting period.

The offset of SSDI benefits to accommodate either a lump sum payment or monthly payments of a workers’ comp claim may affect your finances for a time, but this reduction in benefits is not permanent. As soon as your workers’ compensation runs out, you can notify the Social Security Administration and your monthly benefit will be increased, so long as nothing else has changed in terms of your disability.

Not everyone who receives workers’ comp benefits collects them in installment payments. In some cases, it may be more beneficial for you to accept a one-time lump sum payment for your workers’ compensation claim. If this is the case, then how does workers’ comp and disability affect your monthly allowance?

Most of the time, the SSA will convert your lump sum settlement into monthly installment payments for the purpose of figuring out whether or not you’re surpassing the 80% limit of average current earnings. If, for example, you had been receiving $1,100 per month in workers’ compensation and then took a lump sum payment of $22,000, the SSA will likely calculate the equivalent monthly payment of $1,100 for the next 20 months ($22,000 / $1,100 per month = 20 months). 

If your workers’ comp does not run out, your benefits will change once you reach full retirement age. At this point, you will begin receiving regular Social Security benefits in lieu of SSDI benefits, and your monthly payments should increase to 100% of your maximum possible benefit.

Worker's compensation attorneys often try to draft settlement agreements to minimize any offset of SSDI benefits. Social Security will look at the language of the worker's compensation settlement document to decide how much of the settlement is subject to offset.

Lawyers also will draft the settlement agreement to exclude medical and legal expenses from the lump sum that is counted for Social Security. Social Security will exclude these expenses from being used to calculate the offset if the language in the settlement document is clear. If this language is not included in the settlement agreement, Social Security may ask for documentation of medical and legal expenses before disregarding those amounts from the offset calculation.

If you need help applying for Social Security Disability or SSI, please contact me at joshben99@gmail.com. I have over 20 years experience with Social Security Disability cases.