If you, as an employee, have a debilitating accident at work, there are insurance and government benefits available to you and your family. These include:
- Workers’ Compensation
- Social Security Disability Insurance
- Supplemental Security Income
- Medicare coverage
Even though the sources of these benefits differ (federal vs. state), they are interrelated and you may not be able to receive all benefits at their maximum amount. This is referred to as “offsetting.” The interrelationship with Social Security disability and Workers’ Compensation happens more frequently.
Let’s walk through what this means to you and how your benefits are re-calculated if you collect Workers’ Compensation benefits and file for Social Security Disability (SSD) benefits.
How and why would your Social Security benefit be reduced? This is due to a law that says you can only receive up to 80% of your average current earnings (ACE) when receiving both workers’ compensation and Social Security disability benefits. Simply stated:
If (Workers’ Comp benefit $ + SSD benefit $) > Average Current Earnings, your Social Security benefit will be reduced
So how do you calculate your average current earnings, or ACE? Your ACE is the average of either your highest consecutive 5 years of earnings at anytime during your work history, or the highest year of earnings within the 5 years prior to your disability.
For example: If you earned:$45,000 in 2005$47,000 in 2006$48,000 in 2007$50,000 in 2008$46,000 in 2009
And you became disabled in 2010, $50,000 is the highest earnings for the 5 years before you became disabled. To calculate your ACE, which is 80% of this number:
$50,000/12 mns = $4,166.66/mn * 80% = $3,333.33
Your monthly ACE = $3,333.33
Now, determine your monthly workers’ compensation amount.
For example: You receive $400.00 weekly in workers’ compensation benefits. Multiply this by 4.3333333 (which is the formula Social Security uses to determine your monthly workers’ compensation benefit).
$400.00 x 4.3333333 = $1,733.33 is your monthly workers’ comp benefit in this example.
Lastly, calculate your offset or the highest SSD benefit you can receive (using this example.)
Subtract the workers’ compensation from your ACE to determine your offset.
$3,333.33 – $1,733.33 = $1,600.00
$1,600.00 represents the highest SSD benefit you could receive under this example.
Every case presents different facts. It is crucial, however, that you report any and all changes (reductions and increases) to your workers’ compensation benefits to Social Security if you receive workers’ compensation and SSD, because each change can affect your benefit. Keep good records of all communications regarding changes.
Since the benefits and qualifications can differ from case-to-case and state-to-state, it can be difficult to figure out the bottom line without a lawyer.