How Worker's Compensation Settlement Affects SS Disability Benefits

How does SSA offset work for Worker's Comp benefits?

Let's say you received a lump sum. To calculate how much SSA would offset, SSA first calculates what your maximum amount of benefits would be – they call this the “applicable limit.” The applicable limit is 80% of your pre-injury income, which is what SSA calls your “average current earnings.” They calculate your average current earnings by taking the highest of: (1) the average monthly wage that your Social Security Disability benefit amount is based on (SSA calls this your unindexed PIA); (2) the average monthly earnings from the highest 5 years in a row (high 5); (3) the average monthly earnings from a single calendar year (high 1).

Then, to determine your applicable limit, SSA will take 80% of your average current earnings. SSA will then add your monthly Social Security Disability payment to your monthly worker’s compensation payment. SSA will reduce your payments until it the applicable limit is reached. Because you got a lump sum, SSA will look at the worker’s compensation settlement agreement to calculate your monthly amount and reduce it based on that amount.   

So, as an example, you got a lump sum of $12,000. This averages $1,000 per month. Your pre-injury average earnings were $2,000 per month. You are found disabled by SSA and entitled to ongoing benefits. You are entitled to $1,500 per month from SSA. Then SSA comes along and says "not so fast!" SSA will reduce your total monthly payment so that it meets 80% of $2,000. So, figuring $1,000 from worker's comp, SSA will pay you $600 to bring you up to $1,600 which is 80% of $2,000.