Expect a Reduction
If you receive Social Security disability benefits and workers’ compensation, the Social Security Administration may reduce your SSDI monthly payments. This is called an offset. Social Security requires that total disability payments not exceed 80 percent of the salary you previously made. So, if the amount you receive from SSDI and workers’ compensation exceeds the 80 percent applicable limit, the amount to bring the total down to the applicable limit is deducted from SSDI.
How the Offset Is Calculated
Social Security is going to look at three things when they determine if there needs to be an offset. First, the amount in SSDI that you and your family receive, called the Total Family Benefit. Second, the amount of the workers’ comp benefit, and lastly, your Average Current Earnings, or ACE. Your ACE is going to be the highest of the following: the earnings SSA used to calculate your SSDI benefits, the highest amount you earned during a five-year period while working, or your average earnings in the five years immediately before you became disabled. Using all the calculations listed above, SSA will then determine which is higher, your total family benefit, or 80% of the ACE calculated. These calculations are extremely complicated and can only be done by SSA.
Lump Sum Workers’ Comp
Some people may opt to receive a lump sum instead of workers’ comp. When this happens, Social Security will offset SSDI benefits to account for the lump sum payment. So if you received a lump sum workers’ compensation settlement, Social Security might convert the settlement into a monthly amount to determine how much to take out if the monthly compensation amount exceeds the 80 percent applicable limit.
Minimizing the Offset
There are ways you can reduce the Social Security offset from your lump sum. Sometimes you can draft the settlement to exclude medical and legal expenses from the lump sum amount in which Social Security will exclude them when calculating the offset. However, if this language isn’t included in the settlement agreement, you may have to provide documentation of both expenses before Social Security removes them from the offset calculation.
Having a disability doesn’t mean you can’t work. You do have options if you want to go back to earning your own income again, even if you are receiving federal disability payments.
The Ticket to Work program offers opportunities for people receiving federal disability benefits to train for a return to the workforce without losing their SSDI eligibility. The program is voluntary and offers job training, career counseling assistance, and placement help through authorized Employment Network and vocational rehabilitation agencies partnering with Social Security.
DisABLEd Workers USA is an approved service provider of the Ticket to Work program. Its program specialists can answer your questions about pursuing career goals with a disability and planning a return to work. Call DisABLEd Workers at 877-291-9806 today to speak with a member of the team.