504. Reduction To Offset Workers' Compensation

504.1 Why are disabled workers' benefits sometimes reduced?

Your SSA disability insurance benefits, (and family benefits based on your earnings record) and/or public disability benefit amount may be reduced to fully or partially offset your worker's compensation benefit. If applicable, the reduction also offsets your disability benefit under a Federal, State, or local public law or plan received for the same month.

504.2 When is the reduction in the benefit made?

A reduction in your disabled worker's benefit may be made for any month before the month you turn 62 or 65 (See §504.5.B.). The reduction is made only if the total benefits payable to you and your dependents under the Social Security Act plus your workers' compensation plus your public disability benefits (if applicable) exceed the higher of:

1. 80 percent of your "average current earnings" (see 504.3) before your disability began; or

2. Your family's total Social Security benefit (before the reduction).

The offset of benefits continues until you turn either age 62 or 65 depending on your onset of disability and month of entitlement to benefits.

504.3 What is "average current earnings?"

"Average current earnings" is the highest of:

1. Your average monthly wage upon which your un-indexed disability primary insurance amount is based (see Chapter 7);

2. Your average monthly earnings from covered employment and self-employment during the highest five years in a row after 1950; or

3. Your average monthly earnings based on the single calendar year of highest earnings from covered employment. This single calendar year can be the year that your disability began or any of the five years before.

504.4 When is your disabled worker's benefit NOT reduced?

Your disabled worker's benefit is not reduced if the workers' compensation law or plan under which you receive your benefit provides for its reduction. The workers' compensation law or plan must be in effect as of February 18, 1981.

504.5 What factors determine the offset and its amount?

Different factors are used to determine whether benefits are offset (reduced) and the amount of the offset. The factors depend on when you became disabled and the date you became entitled to benefits:

1. Your workers' compensation benefits and/or public disability benefits received under a Federal, State, or local public program are considered in determining the offset amount if:

   1. You became disabled after February 1981; and

   2. You became entitled to disability benefits after August 1981.

2. Only benefits paid as workers' compensation are considered in determining the amount of the offset if:

   1. You became disabled before March 1981; or

   2. You became entitled to disabled worker's benefits before September 1981.

      Note: The offset of benefits ends when you turn 62 (rather than 65).

504.6 What factors are NOT considered in determining the offset and its amount?

The following are not considered in determining the offset and its amount:

1. All Department of Veterans Affairs benefits;

2. Needs-based benefits;

3. Federal, State, or local disability benefits based on State or local employment, all or almost all of which were covered for Social Security purposes; and

4. Private pension or private insurance benefits.

504.7 How is the reduction amount computed?

The amount of reduction is the amount paid:

1. To you and your dependents under the Social Security Act; plus

2. To you as workers' compensation; plus

3. To you as other your public disability benefits (if applicable) exceed the higher of:

   1. 80 percent of your "average current earnings" before your disability began; or

   2. Your family's total Social Security benefit before the reduction.

The formula above means that your combined payments after the reduction are never less than your total Social Security benefits before the reduction.

504.8 Can your Social Security benefit amount change?

The amount of Social Security benefits payable to you and your family can go up or down based on increases or decreases in your workers' compensation/public disability benefits.

In addition, the amount of the reduction can be adjusted to take into account increases in the cost of living. In no event does a cost of living adjustment decrease the total amount of benefits payable on your earnings record.

504.9 How are lump-sum payments considered when computing the amount of offset?

Sometimes a State Workers' compensation law or a Federal, State, or local public disability benefit law/plan permits a lump-sum settlement. The lump-sum settlement can be in the form of a commutation or compromise agreement and releases the insurer or the employer from liability. Such a settlement is a substitute for periodic payments and is subject to the offset. In this situation, the lump-sum is prorated to reflect the monthly rate that would have been paid had the lump-sum award not been made. Medical and legal expenses incurred by the worker in connection with the workers' compensation/public disability benefit claim may be excluded from computing the offset. (A check representing past due periodic payments which simply brings payments up to date is not a lump-sum.).

For additional information about Workers' Compensation go to: www.workerscompensationinsurance.com/index.htm.

Last Revised: Jul. 26, 2005