When an injured worker is receiving workers’ compensation and expects to be out of work for at least 12 months, then the worker should consider applying for benefits under the Social Security Disability Insurance (SSDI) program. But this raises an important question: does receiving workers’ compensation benefits impact your eligibility for SSDI benefits? The answer is: it depends.
The Social Security Administration (SSA) adheres to its own rules and regulations, so it is important not to mistakenly assume that simply because you received workers’ compensation benefits, you will automatically receive SSDI benefits. For example, a “disability” under your state workers’ compensation laws does not automatically translate to a “disability” under the rules promulgated by the SSA when assessing eligibility for SSDI benefits. Similarly, your state Workers’ Compensation Board generally does not consider SSDI eligibility when calculating workers’ compensation payments.
How NJ Workers’ Compensation Impacts Social Security Disability Insurance Payments
If you are receiving workers’ compensation benefits, the SSA will set a limit on your monthly SSDI benefit payments. Specifically, if you receive both workers’ compensation and SSDI benefits, the total amount of these benefits cannot exceed 80 percent of your average current earnings prior to becoming disabled. Your average current earnings (also known as your “ACE” rate) will be determined by SSA when you apply for SSDI benefits. Here’s an example of how the ACE rate calculation works:
Before Employee A became injured and disabled, they were earning $4,000 per month at their job. This would mean Employee A would likely be eligible for around $2,200 per month in SSDI benefits. If Employee A is receiving workers’ compensation at a 75 percent disability rate, that would translate to $461.54 per week, or $2,000 per month. Since the total amount of combined workers’ compensation and SSDI benefits (i.e., $4200) is in excess of 80 percent ($3200) of the ACE rate for Employee A ($4000), then their SSDI benefits would be reduced by roughly $1000 per month and Employee A would receive $3,200 per month is disability benefits.
It is worth noting that, in the above-described scenario, SSDI benefits are what is offset when an applicant is also receiving workers’ compensation benefits. To put it another way, workers’ compensation payments are not directly impacted or modified based upon applying for SSDI benefits.
If a worker is receiving payments for both workers’ compensation and SSDI benefits, they should make sure to let the SSA know if there is any modification in workers’ compensation payments so the SSA can re-calculate the worker’s monthly SSDI payments.
Impact of Settling a Workers’ Compensation Claim While Receiving SSDI Benefits
For many injured workers, if they are receiving both workers’ compensation and SSDI benefits, then a Section 20 settlement of their workers’ compensation claim may be a prudent decision. For context, a Section 20 settlement allows you to be paid a lump sum of money to resolve your workers’ compensation claim. It is considered to be a full and final settlement of the claim. That means that, one important trade off to consider, is that you cannot “reopen” your claim in the future if your work-related injuries worsen or need more treatment that would otherwise be covered under workers compensation. So, while a Section 20 settlement may have monetary benefit when weighing the financial impact on your SSDI claim, consulting with a Social Security and Workers compensation attorney about the facts in your claim is always the best course of action.
It is important to know that if you want to ensure your SSDI benefit payments are not adversely impacted by a workers’ compensation settlement, then the language in a Section 20 agreement needs to be drafted precisely and in a manner that prorates your lump-sum settlement over your full lifespan. If the agreement is drafted properly, in certain instances, the SSA may actually increase your SSDI payments. Why? Because the prorated amount may reflect a decrease in your weekly workers’ compensation payments, which would thereby allow SSA to increase your SSDI benefit payments. Here is an example of how this works:
Let’s say, Employee B is 38 years old when they are severely injured and become disabled. Like Employee A, they were earning $4,000 per month at their job. They are receiving $461.34 per week (which translates to $2,000 per month) in workers’ comp payments. In light of the monthly workers’ compensation payments, Employee B’s SSDI benefits would be reduced by $1,000 per month as an offset to the workers’ compensation payments, pursuant to the 80 percent rule discussed earlier. If, on the other hand, Employee B were to agree to a settlement of their workers’ compensation claim for, hypothetically, $135,000, then it’s possible their SSDI benefits would not be impacted.
As mentioned, Employee B is 38 years old, which means they would have a life expectancy of around 40 years. If proper language is included in Employee B’s Section 20 settlement, then the SSA could prorate the settlement over the span of 40 years, which would translate to $281.25 per month. Because Employee B’s $2,200 per month in SSDI benefits and $281.25 per month in workers’ compensation is less than 80 percent of their ACE rate ($3,200), then Employee B’s SSDI benefits would not be reduced.
However, it is important to note that this type of prorating language is typically not included by insurance carriers in proposed Section 20 settlement agreements. This is a big reason why you should retain the services of an experienced attorney who can assist in drafting a proper Section 20 agreement.
How an Experienced NJ Disability Lawyer Can Assist You With the Link Between Workers’ Compensation and SSDI Benefits
A myriad of complex issues can arise when injured workers apply for, or receive, both workers’ compensation and SSDI benefits. This is why it is recommended you retain the services of a knowledgeable attorney who understands how both benefit programs work. When you have an attorney on your side, they can assist you with the following:
- Compiling and reviewing medical records and wage statements
- Ensuring you receive maximum disability benefits.
- Making sure both disability benefit systems have the proper information regarding your status.
By assisting you with these issues and more, an experienced SSDI attorney can put you in the strongest position possible to continue supporting your family, even if you are unable to work.
Have Questions About the Interplay Between Workers’ Compensation and SSDI Benefits? Contact an Experienced New Jersey Disability Benefits Lawyer Today
If you have questions about how a workers’ compensation settlement could impact your SSDI benefits, then it is recommended you contact a knowledgeable and experienced NJ disability benefits attorney like Bross & Frankel, P.A. We are dedicated to helping people who are unable to work due to their disabilities. With experience working at the agency level and in private practice, we possess an in-depth understanding of how the SSA works, including how to navigate a myriad of rules and regulations associated with receiving both workers’ compensation and SSDI benefits.
Headquartered in Southern New Jersey, we represent clients throughout New Jersey and the Philadelphia Metro area. To learn more or to schedule a free initial consultation with our New Jersey SSDI Lawyers, contact us online or call our office at (856) 795-8880.