If you were injured on the job, you might qualify for both workers’ compensation benefits and Social Security Disability Insurance (SSDI). This sounds like the best of both worlds, but the two systems do not always work well together. Without proper coordination, the Social Security Administration (SSA) may reduce your SSDI payments because of your workers’ comp settlement.
How workers’ comp and SSDI overlap
Workers’ compensation provides medical care and wage replacement after a job-related injury. Meanwhile, SSDI is a federal program that supports people who cannot work due to long-term disabilities.
There are instances where you may qualify for both. When this happens, the SSA applies an offset rule that limits the combined amount of your SSDI and workers’ comp benefits. This means that the total amount cannot exceed 80% of your average current earnings before your disability. If your combined benefits do exceed the threshold, the SSA will reduce your SSDI payment accordingly.
Why is settlement planning important?
The SSA can reduce your SSDI payment, but you can structure your workers’ comp settlement in a way that minimizes the offset. A common strategy is to spread the lump-sum settlement over your expected lifetime. In this case, the SSA will treat the payout as smaller monthly amounts, so it does not have to reduce SSDI payments.
Here are the things that your lawyer may want to discuss with you before finalizing a settlement:
- The total amount and type of your workers’ comp payout.
- How long you expect your disability to last.
- Whether you will continue to receive other benefits in the future, like pension or unemployment.
- Language in the settlement agreement that clarifies the payment period.
A Michigan lawyer well-practiced in both SSDI and workers’ comp cases can make this process easier for you.
Why coordination matters
A minor oversight in settlement wording can lead to a significant SSDI reduction. In some cases, this can mean losing hundreds of dollars per month in benefits. Remember to speak with a lawyer who can coordinate your benefits and ensure your agreement complies with state law and accounts for your federal benefits.