As I explained in a previous post, the Social Security Administration will reduce or offset your Social Security check if your Workers’ Compensation check and Social Security check combined are more than 80 percent of what you were making before you became disabled. However, settlement can sometimes reduce or even eliminate the offset. We can do this by telling the Social Security Administration that your settlement is meant to be divided over your entire lifetime. When you divide a lump sum settlement over your entire lifetime, it appears to be a much smaller amount. This may lead the Social Security Administration to increase your Social Security check. The advantage of doing this is that you can sometimes get a lump sum settlement and still receive close to the same amount monthly you received before you settled your case. However, this is not always the case. We would need to do a careful calculation to determine how settlement would affect your Social Security check.
For an example of how this works, let’s consider the client who was previously making $30,000 per year and is now getting $300 per week in workers’ compensation benefits. As we described in our prior post, this fictional client could only receive a total of $2000 per month in Social Security Disability Benefits and Workers’ Compensation benefits combined (this is 80 percent of $30,000 per year). In this scenario, the Worker’s Compensation benefits would reduce this client’s Social Security Disability benefit to a maximum of $700 per month. Now, suppose after expenses and fees, this same client settled his case for $150,000 and was 45 years old at the time of his settlement. That would give him a life expectancy of 35.4 years based on current life tables. The Social Security Administration will allow us to divide up the client’s portion of the settlement by his life expectancy. In this case, that would make the weekly amount appear to be $81.48 per week or $353.08 per month. As a result, this client could now receive up to $1646.92 in Social Security Disability benefits rather than the $700 he could receive before setting his case. That’s an increase of almost $950 per month in this client’s Social Security Disability benefit.
As the above shows, sometimes there are factors outside of the Workers’ Compensation case itself that will affect whether or not it’s a good decision to settle your case. Settling your case can allow you to have a lump sum and with an increased Social Security check, keep your monthly pay close to the same as it was before you settled your case. However, it differs from case to case and these calculations can be complicated. Also, the Social Security Administration requires specific language in your Workers’ Compensation settlement documents in order to take advantage of this trick.
If you think your Social Security check is getting reduced because of your Workers’ Compensation check, give us a call and we’ll help you calculate your offset and how a settlement would affect your offset.