Social security law imposes a maximum on the amount of combined benefits a person can receive from both social security disability and worker’s compensation. The purpose of the offset is to avoid duplication of benefits. The maximum amount of combined social security disability and worker’s compensation (WC) benefits is 80% of the person’s average earnings prior to the disability.
When a person receives a lump sum WC settlement, the settlement agreement often sets forth the parties’ intent that the lump sum represents periodic payments pro-rated over the injured worker’s life expectancy. Social security may give effect to such agreements, which may reduce or eliminate the offset that would have occurred without such a pro rating provision.
If there is no language in the original WC lump sum settlement specifying the parties’ intent that the money represents periodic lifetime payments, then social security may apply the offset. If this is the case, it will be very difficult for the parties to amend the language of the original agreement in order to avoid the offset. This is because federal law governs the offset. Social security is governed by federal law, whereas worker’s compensation is governed by state law. So social security will not necessarily be bound by an amended agreement which attempts to circumvent the offset. Social security may view such amendments as illusory, particularly in light of Congress’ intent to avoid duplication of benefits.
See Social Security Ruling (SSR) 97-3.
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.