Did you know that people who receive social security disability insurance (SSDI) can also collect compensation benefits for the same disability if it was caused by a work-related accident or illness? However, there are some offsets you need to know about. In today’s blog, we’ll go over what these offsets are and how you minimized the SSDI offset amount.
How Will a Lump Workers’ Compensation Settlement Affect SSD?
The Social Security Administration (SSA) will not allow people eligible for both benefits to get the maximum amount of each at the same time—regardless of whether they’re getting the workers’ compensation benefits in installments or as a lump sum settlement. The SSDI payments combined with the workers’ compensation should not exceed 80% of an individual’s average earnings before he/she becomes injured or ill.
As a general rule, if the total amount of benefits exceeds 80% of a person’s typical pre-disability earnings, the person will have the excess amount removed from his/her SSDI benefits. Known as a benefit offset, this deduction is necessary to meet the 80% cap federal requirement. The SSA applies the SSDI offset to prevent SSDI recipients from “double-dipping” or collecting the same lost wage from two separate programs.
Why Is There an Offset?
SSDI benefits are meant to help workers who have paid into the system receive financial support that will replace a portion of the lost wages/salary when they suffer a disabling injury or illness. Individuals who receive worker’s compensation benefits also get funds that are meant to replace their lost earnings. Consequently, one of the benefit payers will have to lower the payment of their benefits to ensure that people do not receive more than 80% of their typical earnings.
When offsetting SSDI, the Social Security Administration takes into account the fact that eligible SSDI beneficiaries are likely to take lump-sum workers’ compensation settlements. A common way to offset SSDI payments is by converting the settlement into monthly portions. The agency divides the lump sum by the periodic payments an individual has been receiving and then applies the SSDI benefit offset for that number of months.
How Do I Minimize the SSDI Offset Amount?
The rules regarding benefit offsets provide various opportunities to minimize the amount subject to offsets. Correspondingly, Social Security Disability Insurance attorneys utilize several methods to reduce the potential SSDI benefit offsets and increase the amount of benefits a person can keep. Specific ways an attorney can help you do this is with the use of the following methods:
Language of the Settlement Agreement
When calculating an individual’s offsets, the SSA looks closely at the language in the workers’ compensation settlement agreement. If the language is unclear or without any special terms negotiated into it, the SSA can consider the entire settlement amount when offsetting the SSDI benefits. An attorney can help you exclude legal and medical expenses from the lump sum, making the SSA deduct them from the total settlement amount before calculating one’s offset. The agency will need documentation of the expenses an individual wishes to deduct from his/her workers’ compensation settlement.
A Social Security Disability Insurance attorney and incorporate specific language that will identify the settlement amount intended to pay for excesses like:
- Current medical bills
- Future medical bills
- Attorney’s fee
- Litigation costs
An SSDI recipient can also bring down their potential benefit offsets by including an amortization provision. Using this method, the settlement agreement states explicitly that the lump sum settlement is supposed to be spread out over the rest of the person’s lifetime rather than be collected at once. This path can significantly decrease—or eliminate—the offset amount.
Example: Freddy receives a total of $1,500 a month in SSDI benefits. Instead of having a full $1,500 of the settlement applied to offset the monthly benefit and eliminate the whole SSDI payment, a smaller offset every month allows Freddy to continue receiving more of his benefit each month.
If the lump sum settlement offsets Freddy’s benefits at a rate of $400 every month, he will still get $1,100 of his usual disability benefit payment.
The amortization provision should be added to the original lump settlement agreement document. Adding onto an already existing settlement agreement is not allowed. The SSA will view that as blatantly attempting to outmaneuver the SSDI offset.
Reporting Lump Sum Settlements
When an individual who receives disability insurance accepts a lump sum settlement, he/she will have to make sure they report the settlement within ten days of receiving it. Not doing so will result in severe penalties.
Receiving disability benefits should not stop individuals from pursuing the claims for damages they have against other parties. Disabilities lawyers can help you carefully plan a way to structure lump-sum settlements in a way that will minimize their impact on disability benefits. If you need help reducing your workers’ compensation and SSDI offsets, Bonnici Law Group can help! Give us a call at (619) 259-5199, or click here for a free consultation!