Understanding how your workers’ compensation benefits may affect your Social Security Disability Insurance (SSDI) benefits.
by Casaundra Johnson | Oct 09, 2020 | Social Security and Disability Compensation
Many injured workers have questions about how their workers’ compensation claim will affect their Social Security Disability Insurance (SSDI) benefits. While workers’ compensation benefits will usually reduce Social Security benefits to some degree, the actual impact for any individual will depend on a few factors, including your wages before you became disabled, the amount of your benefits from each program, the type of benefits you receive, and your age.
How does Social Security determine if my benefits will be reduced?
Under the law, your SSDI benefits will be reduced if the total amount of the benefits payable to you (and your dependents) through Social Security, plus your workers’ compensation benefits are more than 80 percent of your “average current earnings” before your disability began. Social Security uses your earnings records to calculate your “average current earnings,” three different ways.
(1) Average monthly wages for your highest five years of earnings (high-five formula)
(2) Average monthly wages for the highest calendar year within the last five years (high-one formula)
(3) Your average monthly wages across your working life (average monthly wage formula).
Social Security uses the highest of these three calculations as your “average current earnings,” and then multiplies this amount by 80 percent to determine the maximum amount of benefits you can receive from Social Security and workers’ compensation at the time. If the combination of your benefits from both programs are more than 80 percent of your average current earnings, your Social Security benefit will be reduced accordingly. However, if the amount of your benefits from both programs is less than 80 percent of your average current earnings, you will receive the full benefit amount from both workers’ compensation and Social Security.
For example, assume your average earnings were $4,000 a month before you became disabled, your maximum monthly SSDI benefit is $2,200, and you receive $2,000 in workers’ compensation benefits each month. In this scenario, your SSDI benefit would be reduced by $1,000 because the total amount of your benefits under both programs ($4,200 per month), is more than 80 percent of your average earnings ($3,200).
Will my workers’ compensation benefit ever be reduced because I am receiving SSDI?
Several states have a reverse offset provision which requires some or all types of workers’ compensation payments to be reduced, instead of the SSDI benefit. In Ohio, the reverse offset provision applies only to permanent total disability (PTD) benefits received under a workers’ compensation claim. This means that if you are receiving PTD compensation under an Ohio workers’ compensation claim, your PTD benefit will be reduced instead of your SSDI benefit. When this happens, the Ohio Bureau of Workers’ Compensation will calculate the reduction in accordance with Ohio law. Since the reverse offset provision for Ohio applies only to PTD benefits, Social Security may reduce your SSDI benefit if you are receiving any other type of Ohio types of workers’ compensation benefit, such as temporary total disability compensation (TTD), permanent partial disability compensation (PPD), scheduled loss awards, and living maintenance compensation.
How long will my benefits be reduced?
The workers’ compensation reduction only applies for months you are receiving both SSDI and workers’ compensation benefits. In other words, your SSDI benefit will increase to the full amount if your workers’
compensation benefits stop. Otherwise, for most people, workers’ compensation reductions will continue until you reach full retirement age, though in some cases the offset may stop as early as 65 years old.
What happens if I settle my claim?
Your SSDI benefit may also be reduced if you settle your workers’ compensation claim. The ultimate impact a workers’ compensation settlement has on your SSDI benefit will depend on several different factors, including the amount of the settlement, how your settlement is structured, and whether any costs or expenses related to the settlement are eligible for exclusion.
If you or a loved one has any questions regarding SSDI benefits and would like to speak to workers’ compensation attorneys or social security attorney at The Bainbridge Firm please stop in to one of our 7 location throughout Ohio or call today.
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