How Workers Compensation Offsets Social Security Disability
An injured worker who applies for workers' compensation benefits may also be eligible for Social Security disability. The Social Security disability program pays monthly benefits to workers who are unable to earn a living due to an illness or injury that has lasted, or is expected to last, at least 12 months or will result in the worker's death. However, workers' comp and disability benefits are both subject to limits that may result in an offset of one or both of the benefit calculations.
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Disability Benefits
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If you win your Social Security disability claim, you will be entitled to a monthly benefit. The amount is calculated by Social Security by using the number of work credits, or quarters, during which you have paid Social Security taxes and by your earnings amount. Social Security may also pay you back benefits, up to 12 months before the date of your disability application, if the agency finds that the onset of your disability took place before you applied.
Workers' Compensation
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Workers' compensation may also pay you indemnity benefits, which is compensation for the time you are losing at work due to your on-the-job injury. These benefits are usually calculated as a percentage of your average weekly earnings in the weeks before your accident. In most states, workers' comp also pays medical bills, mileage payments for your medical appointments and physical and vocational rehabilitation expenses.
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Social Security Offsets
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By Social Security's rules, payments from public agencies such as unemployment or welfare bureaus must be offset by deductions in the amount of disability benefits paid out to disabled workers. Private pensions and disability insurance are not offset in this manner. The theory behind this rule is that income drawn from taxpayer-funded government agencies should be limited, and workers should be discouraged from seeking out public benefits in order to avoid work.
Public Benefits
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Although workers' compensation insurance is, in some states, funded by private insurance policies paid for by employers, in other states public agencies disburse the payments through a central fund to which employers are required to contribute. Social Security does not differentiate: All workers' compensation benefits are considered public benefits, as the workers' compensation system is guided by state law and administered by public agencies.
Offsets
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As a result, Social Security provides for a reduction in benefits if the disability and workers' comp benefits combined exceed 80 percent of the worker's average monthly earnings before the injury. The offset is taken directly out of the monthly benefit check.
Reverse Offsets
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In some states, the law allows workers' comp insurers to offset their own payments to injured workers by an amount equivalent to their monthly Social Security disability benefit. If this is the case, then Social Security does not take its offset.
Settlements
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If an injured worker settles a case with the workers' comp insurer and accepts a lump-sum settlement amount, the Social Security offset continues based on a simple calculation. Social Security divides the settlement amount by the monthly benefits that were paid to the worker before the claim was settled, then continues to use the offset by the resulting number of months. For example, if the settlement is $10,000, and the monthly benefit was $1,000, the resulting number is 10. Social Security will continue to offset disability payments for 10 months, then return disability payments to the full amount.
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References
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