If you are eligible for both social security and workers’ compensation benefits, there are situations where an offset occurs – meaning that one of the benefits is reduced. What actually will happen depends on a number of variables, including the amount of benefits, and the type of Social Security benefits you are receiving (disability or retirement). Your workers’ compensation or social security lawyer may be able to advise you about your individual situation.

The following summary, applies to work injuries occurring after June 24, 1996. This is based on Pennsylvania Workers’ Compensation Law: other states have different rules.

Receiving Workers’ Compensation and Social Security Disability Insurance Benefits

In this situation, your Social Security Disability benefits will be reduced, if the total amount of your monthly disability benefits (including benefits paid to family members), plus your workers’ compensation benefits exceed 80 percent of your “average current earnings.” Your average current earnings are determined by Social using the highest of:

  • the average monthly wage on which the your disability benefits are based,
  • the average monthly earnings during the highest 5 consecutive years, or
  • the average monthly earnings in the calendar year of highest earnings during the 5 years ending with the year in which disability began.

If the combined amounts of your benefits is higher than your average earnings, Social Security will reduce your disability benefits.

Receiving Workers’ Compensation and Social Security Retirement Benefits

In most cases, your workers’ compensation benefits will be reduced by 50% of your social security retirement benefits. The exception to this rule is that if you began receiving retirement benefits before the date of your work-related injury, your workers’ compensation will not be reduced.

If you had been receiving Social Security Disability benefits, these benefits will be converted into retirement benefits at age 65: at that time, Social Security will no longer reduce your benefits, but you may then be subject to having your compensation reduced.

Planning To Maximize Your Social Security and Workers’ Compensation Benefits

Workers’ Compensation cases can often be settled for a lump sum payment. If you are settling a Workers’ Compensation case, even if you are not presently receiving social security disability, your workers’ compensation attorney should include some language in the settlement agreement, to insure that your settlement treated in a favorable manner. Social Security may still apply the offset after you have settled your case: it is possible, however to spread out the settlement over a period of time, so that there will be little or no offset.

If you are considering retirement, you should consider the advantages and disadvantages of delaying your retirement. Taking an early retirement (at age 62) will reduce your social security benefit, while taking a later retirement (as late as age 70) will increase the monthly benefit. {the normal, or full retirement age used to be 65, but is gradually increasing to 67} If there is going to be an offset, which would reduce your workers’ compensation, the advantages of delaying retirement will be greater.

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