If you have an Iowa workers’ compensation case that involves a serious injury, you may also qualify to receive Social Security Disability benefits. In this post I am going to talk about some of the issues and options that come up when you receive both workers’ compensation and Social Security Disability benefits.
One of the first factors to keep in mind is that if the combination of your Social Security disability benefits and your workers’ compensation benefits is too high, then your Social Security disability benefits will be reduced. This is frequently called the Social Security offset.
The rule is that if the total amount of the Social Security benefits and the workers’ compensation benefits exceeds 80% of your “average current earnings,” then your Social Security disability benefits will be reduced to come down to this 80% level. Your “average current earnings” is the highest of your average monthly earnings during the highest five years in a row, or the average monthly earnings based on a single calendar year of highest earnings within five years of your disability. See here for a longer explanation of the rule.
Let me talk about an example from one of my recent cases to try to make this clearer. In that case the injured worker had a good job and his “average current earnings”, worked out to be about $4,500 per month.
The first step in the analysis is that 80% of $4,500 equals $3,600. Therefore, the worker could receive a total of $3,600 of workers’ compensation benefits and Social Security disability benefits per month without being subject to the offset. If the combined total was greater than $3,600 per month, then the Social Security disability benefits would be reduced to bring the total down to $3,600.
In the example my client had a work comp rate of about $640.00 per week which worked out to a monthly rate of $2,773.33 per month. An important step in the analysis is that in calculating the Social Security disability offset the worker is entitled to reduce his workers’ compensation benefits by the amount he pays for legal fees and expenses. In this example that meant that the worker’s net monthly workers’ compensation benefit worked out to be approximately $1,848.89.
The worker’s monthly Social Security disability payment was about $1,750 per month. Therefore, the total of the monthly Social Security disability and the monthly net workers’ compensation benefits totaled $3,598.89. This total of $3,598.89 is just below the $3,600 level which is 80% of the worker’s “average current earnings.” Therefore, the monthly Social Security disability payments were not reduced at all by the work comp payments.
An important point to keep in mind is that workers with lower earnings than the example discussed above generally end up having a significant reduction of their Social Security disability payments if they also receive work comp benefits. However, every case is different and the specific details have to be analyzed very carefully.
If you are receiving both Social Security disability benefits and workers’ compensation benefits you also have another option which will generally allow you to receive 100% of your Social Security benefits, and receive a single lump sum payment as an alternative to receiving weekly workers’ compensation payments. The procedure is to settle the workers’ compensation case with a compromise settlement, and add special Social Security disability language.
Working off the example discussed above, the worker was 60 years old and had received a permanent total disability award which entitled him to receive weekly benefits for the rest of his life. Under the Iowa workers’ compensation life expectancy tables, a 60 year old worker would be expected to live another 1,144 weeks or 22 years.
The worker’s life expectancy of 1,144 weeks at his workers’ compensation rate of $640 would result in total payments of $732,160. However, those payments would be paid out weekly over the course of 22 years, and the present value of the payments is worth less than $732,000. Therefore, the parties sometimes work out an agreement to pay an immediate lump sum amount such as $650,000 rather than 1,144 weekly payments of $640 each.
Generally, if a worker received a lump sum payment of $650,000, that would make him ineligible to receive Social Security disability benefits. However, by using an Iowa compromise settlement with Social Security language the settlement amount can be prorated over the worker’s life expectancy for purposes of calculating the offset. This generally allows the worker to continue to receive his full monthly Social Security disability payment, and also receive the lump sum payment in replacement for his weekly workers’ compensation benefits.
This explanation of the interaction of workers’ compensation benefits and Social Security disability benefits really just hits the high points, and is an illustration of what can be done in certain cases. The devil is in the details, and no injured worker should try to work out this type of settlement without the advice and help of an experienced lawyer.
Additionally, in big injury cases like this it is also very important to carefully address future medical care. I will talk about the future medical care issues in my next post.