Can I Get Disability After A Workers’ Comp Settlement?

Can I Get Disability After A Workers’ Comp Settlement?

Suppose someone cannot work because of a job-related injury or illness. A workers’ compensation claim through their employer’s workers’ comp insurance typically pays for medical costs and lost wages. When the injury or illness is severe enough to prevent a person from returning to work for a year or longer, they may also be entitled to disability benefits through the Social Security Administration.

Things get complicated when someone qualifies for workers’ comp and federal disability benefits. If you receive a workers’ comp settlement or periodic payments, it may affect disability benefits.

The disability lawyers at the Clauson Law Firm want you to understand what happens to your disability after a workers’ comp settlement. The following information explains how state-mandated compensation programs work when you also qualify for disability benefits through the Social Security Disability Insurance or Supplemental Security Income programs.

What Is Workers’ Comp, And How Does It Work With Disability Benefits?

Before states passed workers’ compensation laws, the sole remedy for workers injured on the job was to file a lawsuit against their employers to recover lost wages, medical expenses, and other losses. Workers had to prove it was the negligence of their employers that caused their injuries and losses.

Lawsuits were a disaster for both the workers and their employers. Workers waited as their lawsuit dragged on through the court system. Winning did not guarantee that an employer had the financial resources to pay a judgment awarded to a worker. From an employer’s perspective, lawsuits were costly to defend against.

Workers’ comp laws replaced the lawsuit system of compensating injured workers with one that did not rely on fault. Instead, employers obtain insurance to compensate those who work for them when they suffer injuries or illnesses related to their work. Workers generally gave up their right to sue their employers in return for the following benefits:

• Immediate access to medical treatment for workers injured on the job.
• Workers ‘ comp insurance pays medical expenses for covered injuries and illnesses.
• Salary replacement benefit is a percentage of a worker’s weekly wages for time lost because of injury or illness.
• Survivor benefits when covered workers die as a result of workplace injuries or illnesses.

Workers’ compensation operates without forcing a claimant to prove fault on the part of their employer or another party to receive compensation.

The primary objective of workers’ compensation is for injured workers to receive immediate medical care to make it possible for them to return to work. A worker with severe injuries who may be unable to return to work for a long time, if at all, may be offered a settlement instead of periodic payments.

An employer and workers’ comp insurer may offer a settlement instead of continuing to pay periodic payments for medical costs and lost earnings. Before accepting a workers’ comp settlement, a worker has to be aware needs to be mindful of and consider its effect on Social Security disability benefits.

Qualifying Social Security Disability Benefits

Social Security Disability Insurance and Supplemental Security Income are federal programs providing disability benefits for individuals who meet eligibility requirements. The SSDI program requires that applicants have a long enough history of paying Social Security taxes on income earned at jobs or through self-employment.

The SSI program differs from SSDI in several ways, including the following:

• Applicants do not need to show a work history to qualify for benefits.
• SSI is a need-based program that limits the income and resources a person may have and qualify for benefits. For example, the total value of resources or assets that a person may have available to them cannot exceed $2,000 for individuals or $3,000 for an individual with an eligible spouse.
• SSI benefits are available to applicants who are blind or disabled. Someone without a disability or blindness who meets the financial requirements may qualify for benefits if they are 65 or older.

Someone who meets the non-medical requirements for SSI and SSDI must be disabled. Federal regulations define a disability for adult applicants as the inability to engage in substantial gainful activity caused by a medically determinable physical or mental impairment or combination of impairments expected to cause death or that has lasted or is anticipated to last for a continuous period of at least one year.

Federal regulations use “substantial gainful activity” to describe the physical and mental activities a person needs to perform at a job where they earn an income. Social Security uses monthly earnings to determine whether a person can do substantial gainful activity. A person who is blind with monthly earnings exceeding $2,590 a month in 2024 is engaging in substantial gainful activity. The SGA amount for disabled individuals who are not blind is $1,550.

Disability Benefits While Collecting Workers’ Compensation

A person who qualifies for workers’ comp also qualifies for SSI or SSDI, special rules may affect the amount of their federal benefits. The income limits imposed for benefits through SSI may prevent a person from receiving workers’ comp payments.

The maximum monthly SSI federal benefit in 2024 is $943 for individuals. Earned and unearned income, including workers’ compensation payments, reduce the SSI payment. However, not all income counts as an offset against SSI, so a person should speak with a Clauson Law disability lawyer to determine how workers’ comp and other income sources may affect their SSI.

SSDI does not have income limits, but special rules apply to workers’ compensation payments. The combination of SSDI and workers’ comp cannot exceed 80% of a person’s average earnings before becoming disabled. If it does, Social Security reduces the monthly SSDI benefit to keep the combined payments within the 80% cap.

The workers’ compensation offset applies while a person receives payments through SSDI. When someone reaches full retirement age, their  SSDI benefits convert to Social Security retirement. Typically, the conversion does not change the amount of a beneficiary’s monthly payment, but eliminating the workers’ comp offset may cause the retirement benefit to be more than what they received with SSDI.

An important note about an exception to the SSDI offset rule for former members of the military. SSDI offset does not apply to disability benefits paid through the Veterans Administration. Anyone with questions about VA benefits should speak with a VA disability lawyer at Clauson Law.

Workers’ Comp Settlement And Disability Benefits

If state law allows insurance companies to offer a lump-sum workers’ comp settlement, its effect on disability benefits depends on whether you receive SSDI or SSI. A settlement could cause a person to exceed the SSI income and resource restrictions, making them ineligible for benefits.

It may be possible to get SSI disability after workers’ comp settlements using a special needs trust. Money from the settlement to pay for services on behalf of the disabled person SSI does not pay.

Another option is spending the settlement money on purchases allowed under federal law and regulations, such as adding a wheelchair ramp or other accommodations to their home that benefit the disabled person. Spending down and special needs trusts use the workers’ comp settlement to keep the disabled person’s income and resources within SSI guidelines.

A workers’ compensation settlement affects SSDI benefits differently than it does SSI. A settlement is subject to the offset rules prohibiting a person’s combined compensation and SSDI from exceeding 80% of their income when they worked before being disabled. First, Social Security must calculate the monthly value of the settlement.

Sometimes, workers’ compensation specifies how the settlement was calculated. For example, a workers’ comp settlement of $390,000 may specify that it was calculated based on $750 weekly for 10 years. The Social Security Administration can accept the calculation and use the specified prorated amount, $750, to determine the offset, or it may calculate the prorated amount using a different method, such as the life expectancy of the disabled person.

Another way to reduce the impact of a settlement on SSDI benefits is by including in the settlement agreement a deduction of the claimant’s legal fees and incurred medical expenses from the settlement payment. The effect is to reduce the amount of the settlement used to calculate the SSDI offset.

Getting The Disability Benefits You Deserve

If you were injured or became sick because of a workplace accident or hazardous condition, you may wonder whether a workers’ comp settlement improves your chance of being approved for disability benefits. The Social Security Administration denies benefits to more than two-thirds of the applicants who apply for disability benefits each year.

Being approved for workers’ compensation does not make it easier to meet the strict non-medical and medical requirements and comply with complex laws, regulations, and procedures to qualify for Social Security disability benefits. A disability lawyer from Clauson Law puts someone with years of experience helping people challenge claim denials through each stage of the appeals process. Whether you need to start the application for disability benefits or received a denial of a claim and want aggressive representation to appeal it, Clauson Law makes a difference. Learn more by scheduling a free consultation and claim review with one of our disability lawyers by contacting the Clauson Law Firm today.