A work injury may leave you managing not just pain and lost wages, but also two benefit systems at once. Workers’ compensation replaces part of your income after a job-related injury or illness. Meanwhile, Social Security Disability Insurance (SSDI) pays benefits when a serious health condition keeps you from doing much work. If you receive both benefits, Social Security could lower your SSDI payment.
Why Social Security reviews both benefits
Federal law limits the combined amount you may receive from SSDI and workers’ compensation. Social Security uses your past earnings to set that limit. In most cases, the limit is 80% of your average earnings before your disability began.
Social Security may also count SSDI benefits paid to your spouse or child. If the combined total exceeds the limit, the agency first reduces the benefits paid to your family members before reducing your own primary SSDI payment. This reduction is called a workers’ compensation offset.
The offset does not always last as long as your SSDI benefits. The offset ends when your workers’ compensation checks stop, when you reach full retirement age or once the allocated duration of a lump-sum settlement expires. The terms of the settlement could affect how long the reduction lasts.
Why settlement terms and records matter
A lump-sum settlement often replaces weekly workers’ compensation checks. Social Security may treat the settlement as weekly payments spread over time rather than as one large payment. This allows the agency to decide how much of the settlement counts during each month and whether it affects your SSDI payment. Social Security reviews the agreement to find the weekly rate and the dates the settlement covers.
Some legal fees and medical costs might reduce the amount Social Security uses to calculate the offset. Before you report a settlement, consider checking whether the agreement lists the weekly rate, covered dates and related costs. You should also keep the signed agreement, payment notices and proof of those costs. Clear records help you check whether the agency calculated any SSDI reduction correctly.
Understanding the benefit changes
Workers’ compensation and SSDI follow different rules, but one benefit may affect the other. Gaining insight on the process could help you understand why your payment changed. Keeping full and clear records might also make it easier to see how Social Security calculated your benefit.