Coordinating Social Security Disability and Workers’ Compensation Benefits

Many people with work-related injuries will qualify for Disability if they’re persistent in pursuing their claim through the Social Security appeals process. Most Social Security Disability applications are initially denied and the Social Security Administration reports that you’re much more likely to recover benefits if you’re represented by an experienced attorney.

In fact, it’s especially important to get legal advice if you plan to settle your Workers’ Compensation claim or if you believe you should qualify for both Workers’ Compensation and Social Security Disability. The terms of your Workers’ Compensation settlement can have a huge impact upon the amount of Social Security benefits you receive and the degree to which Medicare will cover your future medical expenses.

You can receive Workers’ Compensation and Social Security Disability at the same time, up to a combined benefit of 80% of the income you were earning before you became disabled. Unlike most Workers’ Compensation benefits, Social Security includes annual “cost of living” increases and may pay additional benefits for your spouse and children.
But the Workers’ Compensation and Social Security laws determine the amount of income you were earning before you became disabled in very different ways.

Your Social Security Disability benefits are usually based upon your “average current wages” before you became disabled, which is the larger of (1) your average annual lifetime earnings, (2) your average earnings during the five years before you became disabled, or (3) your earnings during the year before you became disabled.

Meanwhile, your Workers’ Compensation benefits are usually based upon your “average weekly wage,” which is the average weekly income you earned in the few weeks just before your injury. In Louisiana, your Workers’ Compensation benefits are generally based upon your wages in the four full weeks just before your accident or the beginning of your illness.

While you’re receiving Workers’ Compensation benefits, your Social Security benefits may be reduced so that the combined benefits don’t go over 80% of your “average current wage” as determined by the Social Security Administration. The exception to this rule in Louisiana is that the claimant’s employer may request that the offset be reversed if the Louisiana Workers’ Compensation Court determines that the claimant is permanently totally disabled.

The Social Security offset can become a very important issue when a Workers’ Compensation claim is settled because the Social Security Administration may treat the lump-sum settlement as a replacement for periodic benefits. They may pro rate the amount of the settlement at the same rate that the claimant was receiving Workers’ Compensation wage benefits before the settlement. The Social Security Administration applies either (1) the rate specified in the lump-sum award, (2) the periodic rate paid prior to the lump sum settlement, or (3) your state’s Workers’ Compensation maximum in effect for your year of injury. This figure can be used if no rate is specified in the award or there were no periodic benefits paid before the settlement.

The net effect is that a claimant’s Social Security benefits will continue at same rate they were being paid before the Workers’ Compensation settlement though the claimant is no longer receiving Workers’ Compensation indemnity benefits. This can be particularly painful where the claimant has used their Workers’ Compensation settlement to pay debts that they incurred while their claim was pending.

To address this problem, the Social Security Administration allows you and your employer to stipulate in your Settlement Agreement that the amount paid in the lump-sum settlement of your Workers’ Compensation claim is intended to compensate you for your lost wages (or loss of earning capacity) over your entire remaining work-life. The settlement documents should explicitly state the term and imputed periodic rate of the lump-sum settlement.

In the typical settlement of a disputed Louisiana Workers’ Compensation claim, the appropriate stipulation in the Joint Settlement Petition should substantially reduce or eliminate the Social Security offset.

David Buie is a Louisiana Workers Compensation Lawyer representing individuals throughout all of Louisiana. www.DavidBuie.com

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