When a worker is injured on the job they may be entitled to worker’s compensation benefits. If the worker is injured and unable to work for at least a year they may also be entitled to Social Security disability benefits. A worker who receives both these benefits needs to be aware that their Social Security disability benefits can be reduced if they are receiving worker’s compensation benefits.
Why Are Disabled Workers’ Benefits Sometimes Reduced?
Your Social Security (SS) disability insurance benefits, (and family benefits based on your earnings record) may be reduced to fully or partially offset your worker’s compensation benefit.
SS disability insurance benefits may also be reduced if you receive public disability benefits, which are disability benefits paid under a Federal, State, or local public law or plan.
When Is The Reduction In The Benefit Made?
A reduction in your disabled worker’s benefit (and family benefits based on your earnings record) may be made for any month before the month you turn 62 or 65 (See §504.5.B.). The reduction is made only if the total benefits payable to you and your dependents under the Social Security Act plus your workers’ compensation plus your public disability benefits (if applicable) exceed the higher of:
80 percent of your “average current earnings” (see 504.3) before your disability began; or
Your family’s total Social Security benefit (before the reduction).
The offset of benefits continues until you turn either age 62 or 65 depending on your onset of disability and month of entitlement to benefits.
What Factors Determine The Offset And Its Amount?
Different factors are used to determine whether benefits are offset (reduced) and the amount of the offset. The factors depend on when you became disabled and the date you became entitled to benefits:
Your workers’ compensation benefits or public disability benefits received under a Federal, State, or local public program are considered in determining the offset amount if:
You became disabled after February 1981; and
You became entitled to SS disability benefits after August 1981.
Only benefits paid as workers’ compensation are considered in determining the amount of the offset if:
You became disabled before March 1981; or
You became entitled to SS disabled worker’s benefits before September 1981.
NOTE: The offset of benefits ends when you turn 62 (rather than 65).
What Factors Are NOT Considered In Determining The Offset And Its Amount?
The following are not considered in determining the offset and its amount:
All Department of Veterans Affairs benefits;
Needs-based benefits;
Federal, State, or local disability benefits based on State or local employment, all or almost all of which were covered for Social Security purposes;
Private pension or private insurance benefits;
Black Lung Part B benefits;
Railroad Unemployment Insurance Act (RUIA) sickness benefits;
Railroad injury settlement payments under the Federal Employer’s Liability Act (FELA);
Unemployment benefits;
Sick pay paid by an employer;
Proceeds from third party settlements;
Interest or other income generated by workers’ compensation investments;
Jones Act payments;
Payments from tort (negligence) lawsuits;
Workers’ compensation/public disability benefits paid under a law or plan enacted by an American Indian Tribal Government; and
Workers’ compensation payments made to the employer.
How Is The Reduction Amount Computed?
The reduction is determined the first month you receive both SS disability benefits and workers’ compensation benefits/public disability benefits. The reduction amount is computed using the higher of the following two amounts (the higher amount is known as the “applicable limit”):
Eighty percent of your “average current earnings” before your disability began (the “average current earnings” is derived by using your highest year(s) of earnings (see 504.3)); or
The total amount of Social Security disability insurance benefits you and your family receive (known as the “total family benefit”) in the first month you also receive workers’ compensation or public disability benefits.
SS disability benefits are reduced when the total of your monthly workers’ compensation benefit plus any public disability benefit you receive exceeds the “applicable limit”.
