Does Workers’ Compensation Affect SSD Benefits?
You may know that the Social Security Administration (SSA) doesn’t consider your financial resources when determining whether you’re eligible for Social Security disability (SSD) benefits. While income from work is considered because it helps the SSA determine whether you’re disabled, you can own a mansion or win the lottery and it won’t have any impact on your eligibility for SSD benefits or the amount of benefits you receive.
But, some other types of disability benefits, including workers’ compensation benefits, may impact your SSD.
Do Workers’ Compensation Benefits Disqualify You from Receiving SSD?
The simple fact that you’re receiving workers’ compensation benefits, or that you’ve received a lump sum settlement from workers’ compensation, won’t disqualify you from receiving SSD. But, those benefits may reduce the amount of SSD you can receive. Here’s how it works.
How SSD Benefits Are Calculated
Normally, your SSD benefits are calculated based on your past earnings. Your earnings are indexed to bring them in line with current wage levels. Then, the SSA uses the 35 highest-earning years to calculate your average indexed monthly earnings (AIME). A formula is applied to your AIME to determine your Social Security retirement benefit. That’s relevant here because your normal SSD benefit amount will be the same as the amount you would receive if you worked to full retirement age.
Here’s how that works in 2024: The SSA adds up 90% of the first $1,174 of your AIME, then 32% of any amount over $1,174 up to $7,078, then 15% of any amount over $7,078. The result is your monthly benefit at full retirement age.
If your AIME is $5,000/month, the calculation looks like this:
$1,174(.90) = $1,056.60
($5,000 – $1,174)(.32) = $1,224.32
$1,056.60 + $1,224.32 = Full retirement benefit of $2,280.92, rounded down to $2,280.92.
If your AIME is $8,000/month, you’ll also have a portion of your AIME multiplied by 15%. The calculation looks like this:
$1,174(.90) = $1,056.60
($7,078 – $1,174)(.32) = $1,889.28
($8,000 – $7,078)(.15) = $138.30
$1,056.60 + $1,889.28 + $138.30 = Full retirement benefit of $3,084.18, rounded up to $3,084.20.
That formula still applies when you’re receiving workers’ compensation or certain other public disability benefits. But, there’s another step that can reduce your benefits.
Combined SSD and Workers’ Compensation Benefits are Capped
The combined amount of your SSD benefits, your workers’ compensation benefits, and certain other public disability benefits cannot be more than 80% of your average current earnings. Note that average current earnings are different from AIME, and may be more or less than the number used to calculate your full benefit amount.
Here’s an example of how workers’ compensation could impact the amount of SSD benefits received:
The person in the second example above would have an SSD benefit without workers’ compensation or another public disability benefit of $3,084.20. Say their earnings were lower toward the end of their career, and their average current earnings at the time they became disabled were $5,000/month.
Since their combined benefits are capped at 80% of that $5,000, their SSD benefits will be reduced as necessary to avoid going over that total.
In many areas, workers’ compensation benefits pay ⅔ of the injured worker’s regular income up to a cap. If this person is in one of those states, with a regular income of $5,000, that means about $3,333 in workers’ compensation benefits.
You can probably already see that the combined amount of benefits is going to exceed the 80%/$4,000 cap.
$3,084.20 in SSD benefits + $3,333 in workers’ compensation benefits = $6,417.20. That’s far above the cap. To comply with the 80% rule, the SSA will reduce SSD benefits to the difference between the cap (in this case $4,000/month) and the worker’s compensation benefit (in this case, $3,333/month). That means SSD will pay just $667/month.
The exact numbers and how much impact workers’ compensation has on your SSD benefits vary based on the amount of your full SSD benefit, your current average earnings, and the amount of workers’ compensation disability pay you’re receiving. An experienced disability benefits advocate can explain in more detail how this might play out in your particular circumstances. For now, just be aware that if your combined benefits exceed the cap, your SSD will be reduced.
Not All Disability Benefits Reduce SSD
While workers’ compensation and some other forms of public disability benefits can impact SSD payments, that’s not true of every type of disability benefit. For example, a disabled veteran who is also eligible for Social Security disability can collect SSD and veterans’ disability benefits at the same time, without either being diminished.
You can receive both SSD and Supplemental Security Income (SSI) at the same time if you’re qualified for both. But, SSI is a need-based program that takes income into account. So, depending on the amount of SSD you receive, you may not be eligible for SSI or your SSI benefits may be reduced.
Disability insurance benefits such as those provided by your employer or that you purchased yourself don’t impact your eligibility for SSD or the amount of SSD you receive. But, you may find that your private disability payments are cut if you’re receiving SSD. Whether they’ll offset SSD payments and by how much depends on the terms of your disability insurance policy.
Get Help with Your SSD Claim or Appeal
Whether you’re filing for SSD benefits for the first time or appealing a denial, an experienced disability benefits advocate can be your best resource. At Disability Help Group, our advocates know how stressful and daunting the SSD application and appeals process can be. We also know that an issue like the reduction of SSD benefits due to workers’ compensation is just one of many that may cause complications or confusion.
We are dedicated to helping disabled people and their families get the benefits they deserve, and to keeping that process as stress-free as possible. To learn more about how we can help, call 800-800-3332 right now, or contact us here now.