What is the “Workers’ Compensation Offset” and how will it affect my Social Security case?
If you collect Workers’ Compensation benefits and file for Social Security Disability (SSD) benefits, you may not be able to receive both types of benefits at their maximum amounts. Your Social Security benefit may 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. If your workers’ compensation benefits and Social Security disability benefits add up to a higher amount than your ACE, your Social Security benefit will be reduced.
You can determine if this will happen by performing a 3-step analysis:
1. Compute your average current earnings, or ACE. Your average current earnings is an amount that is determined by averaging either your highest consecutive 5 years of earnings or averaging the highest year of earnings within the 5 years prior to your disability.
Example: If your highest year of earnings for the 5 years before you became disabled was $60,000, you would divide this by 12 to get a monthly total, then take 80% of that figure:
60,000/12 = $5,000
80% of $5,000 = .80 x $5,000 = $4,000.00
$4,000.00 represents your average current earnings, or ACE.
2. Determine your monthly workers’ compensation amount per month
Example: You receive $500.00 weekly in workers’ compensation. Multiply this by 4.3333333 (which is how Social Security will determine your monthly workers’ compensation benefit).
$500.00 x 4.3333333 = $2,166.66
3. Subtract the workers’ compensation from your ACE to determine your offset.
$4,000-$2,166.66 = $1,833.34
$1,833.34 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. When you inform Social Security, you should do so in writing, keep a copy for yourself, and follow up to make sure your correspondence was received.
For more information on how the workers’ compensation offset may affect your particular case, contact Segar & Sciortino, PLLC today.