When a person settles a workers’ compensation case for a lump sum, that impacts their Social Security benefits because the two can offset one another. To minimize the impact, he or she should contact a workers’ compensation attorney to make sure that the prorating is as favorable as possible.
A person can receive Social Security disability benefits and other disability payments at the same time. Disability payments from private sources such as insurance payouts and private pensions have no impact on Social Security. In contrast, workers’ compensation benefits and some of the other disability payments from public sources offset Social Security. The rule is that someone cannot receive more than 80 percent of their average current earnings from the combined total of their Social Security benefits and other public disability payments.
Average current earnings is calculated by dividing a person’s high year of income to come up with a monthly figure. High year of income is calculated by taking the highest of either the highest year of income within 5 years of the impairment or the average of income over the last 20 years. As a result, if someone had a high year of income of $36,000, he or she would not be able to receive more than $2,400 per month from the combined total of their Social Security benefits and other public disability payments.
When a person settles their workers’ compensation case for a lump sum, that payment is not used to offset Social Security benefits all at once. Instead, it is prorated to reflect the monthly rate that would have been paid if the case had not been settled. However, there are some medical and legal expenses that can be excluded when prorating, so the assistance of a workers’ compensation attorney can help a person make the prorating as favorable as possible in order to reduce the impact on their Social Security benefits. Furthermore, a workers’ compensation attorney can provide interested individuals with important information about the offsetting provisions in regards to Social Security benefits and other public disability payments as well as other relevant issues, which can help them make their decisions going forward.
The connection between Social Security benefits and other public disability payments can have complicated implications for people who are entitled to both. As a result, said individuals should contact a workers’ compensation attorney for help making sense of the interactions.