Anyone who is receiving social security disability benefits and has a workers’ compensation claim pending needs expert legal advice in order make sure that they are as protected as possible.
Social Security (“SS”) allows its disability recipients to receive additional compensation from workers’ compensation (“WC”) cases in some, but not all situations. It uses a mathematical formula to determine who can get both types of benefits, and how much they can receive.
Here (in a very brief way) is how it works:
Start with at least a guess as to the so-called “ACE” (“average current earnings”) number which is the highest income the recipient reported on tax returns in any given year for the five years prior to the recipient’s “onset date”, the date SS disability benefits began. So, for example, if a recipient knows that her or his highest hourly wage rate in any of those years was a little under $30, for a steady forty hour week, that multiplies out to an ACE number of about $60,000, or $5,000 a month.
SS takes 80% of the ACE number, ($4,000 in this example). It adds up the monthly payments from SS disability payments (including amounts paid to dependent children) and WC, and for every dollar that is over that 80% threshold, it offsets a dollar on the monthly SS payment. The recipient is still on SS (including Medicare), just getting less money.
So, in this example, if a recipient is getting $2,000 in monthly SS disability benefits, the recipient could get $2,000 monthly in WC money before losing any SS money.
In Missouri, WC attorneys often use an addendum in settlements in an effort to spread a recipient’s net recovery after attorney fees and expenses out over the recipient’s lifetime. So a recipient with a 20 year life expectancy (some attorneys use SS life expectancy tables to estimate this number) who recovers $36,000 from WC, and whose attorney fees and expenses total $12,000, is really only getting $24,000, which, spread out over 20 years, amounts to $1,200 yearly or $100 monthly. Thus, in this example hardly any settlement would result in an offset if an addendum were properly used and not contested. (the SSA, and not the addendum, is officially the final word on the amounts to be considered.)
However, high value judgments and settlements, such as cases of permanent total disability (“PTD”), can be another story.
If a SS recipient is, for example, entitled to receive a weekly WC payment of $850 for WC PTD, that figure, times 52 is $44,200 per year, about $3,700 per month gross, or (in Missouri) about $2,800 net to the recipient after attorney fees and expenses. The recipient in this example, who has a $4,000 ACE number and is getting $2,000 in monthly SS disability benefits could have about $800 offset monthly: the SS disability check could be reduced to at least $1,200.
And that’s before you add in any lump sum paid for past due benefits. For WC PTD judgments, the past due lump sums alone can often create offset issues, and not just because post-judgment addenda are not allowed.
Another consideration for older SS disability recipients is whether to switch their SS benefits to SS retirement benefits at age 62: these offset rules do not apply to SS retirement benefits. Making this switch may or may not be a good idea: a recipient considering such a decision must get expert financial advice before doing so.
Finally, as a general rule of thumb, for WC settlements, the SS offset is generally less of a problem for high wage earners but is very frequently a consideration for low and minimum wage earners.