If you are unable to work due to a physical or mental impairment, you may be entitled to collect more than one type of lost income benefit at the same time. Did you know that there are special “offset” rules that can reduce your benefits under this circumstance?

SSD OFFSET RULE FOR THOSE COLLECTING WC BENEFITS

One offset rule applies to those who collect Workers’ Compensation (“WC”) and Social Security Disability (“SSD”) benefits at the same time. This rule says that you cannot collect more than 80% of your average earnings before you became disabled when you add your WC and SSD benefits together.

The theory behind this offset rule is simple. If you can collect almost as much in lost income benefits as you would have earned if you worked, you might not try to work.

The SSD offset rule requires consideration of: (1) your average current earnings; (2) your estimated SSD benefit; and (3) the amount of WC lost income benefits that you have collected (and expect to collect into the future).

DETERMINING YOUR AVERAGE CURRENT EARNINGS

To determine whether the offset rule applies to you, the Social Security Administration (“SSA”) first calculates your average current earnings (“ACE”) using one of three different formulas. The SSA uses the formula that produces the highest earnings for you.

For example, one formula uses your average earnings over any five-year period that you earned the most money. Another formula uses the one year that you earned the most money in the last five full years before you became disabled.

Suppose you earned $45,000/year on average during the five-year period that you earned the most money. Also suppose that, due to regularly working overtime, you earned $60,000 in one of the last five full years before you became disabled. The SSA would determine your ACE as $60,000 (one year high in last five full years) because it is greater than the highest five-year average of $45,000.

To determine the 80% ceiling, the SSA simply multiplies the ACE by 80%. Thus, your 80% ceiling based on the ACE determined above would be $48,000 (80% of $60,000 = $48,000).

YOUR ESTIMATED SSD BENEFIT

For most people, their SSD benefit is based on their lifetime earnings from working. Assuming the SSA has accurate earnings information for you, they can estimate the “full amount” of your SSD benefit before any offset. This full amount is commonly known as your Primary Insurance Amount (“PIA”).

YOUR RECEIPT OF WC LOST INCOME BENEFITS

The last piece of information the SSA requires involves your receipt of WC lost income benefits. It is VERY important that you notify the SSA promptly each time your WC benefits change. This is true whether your WC benefits increase or decrease. Doing so will ensure that the SSA properly applies the offset rule and promptly determines whether you owe them money.

Even after the SSA acknowledges that you are collecting WC benefits, you must notify them of any changes in the amount. The SSA is very busy and moves slowly; thus, be prepared to follow up with them regularly. You should NOT assume that the SSA has considered these changes unless you get written confirmation that they have done so.

Failing to notify the SSA of your receipt of WC benefits can be devastating. If the SSA learns that it paid you more SSD benefits than you were entitled to receive, it will issue a Notice of Overpayment and will attempt to collect the money owed to them. The SSA can withhold some or all of your SSD benefit until it collects the overpaid amount.

LUMP SUM PAYMENTS AND SETTLEMENTS

Lump sum payments are made in many WC cases. These payments can include benefit adjustments, schedule loss of use awards, and settlements.

In some circumstances, your receipt of a lump sum payment in your WC case will result in a finding that you were overpaid SSD benefits. There are strategies to address this issue.

Settlements are more complicated. The language in a WC settlement agreement can have a significant impact on whether you collect SSD after the settlement and, if so, the amount of your SSD benefit going forward. Thus, we strongly recommend you consult with an attorney before signing a WC settlement agreement, especially when you are also collecting SSD benefits.

If you enjoy this column, please “like” Modica Law Firm on Facebook to stay current on all that we’re sharing. If you have questions about this article or want to suggest a future topic, contact Steve Modica at 585-368-1111 or Steve@ModicaLawFirm.com. Modica Law Firm is located at 2430 Ridgeway Avenue, Rochester, New York 14626.