Ordinarily, disability payments from other sources do not affect your Social Security disability benefits. But, if the disability payment is Workers Compensation or another public disability payment, you and your familys Social Security benefits may be reduced.
Your Social Security disability benefit will be reduced so that the combined amount of the Social Security benefit you and your family receive plus your Workers Compensation payment and/or public disability payment does not exceed 80% of your average current earnings. (Note that the unreduced benefit amount if counted for income tax purposes.)
What Payments May Affect Your Disability Benefits?
The kinds of payments that affect your Social Security disability benefits are a Workers Compensation and/or another type of public disability payment. A Workers Compensation payment is one that is made to a worker because of a job-related injury or illness. It may be paid by federal or state workers compensation agencies, employers, or insurance companies on behalf of employers.
Public disability payments that may affect your Social Security benefit are those paid under a federal, state, or local government law or plan that pays for conditions that are not job-related. Examples are civil service disability benefits, military disability benefits, state temporary disability benefits, and state or local government retirement benefits which are based on disability.
What Payments Do Not Affect your Social Security Disability Benefits?
The following payments do not count when deciding if your Social Security benefits will be reduced:
Veterans Administration benefits;
Federal benefits, if the work you did to earn them was covered by Social Security;
State and local government benefits, if the work you did to earn them was covered by Social Security;
Private pensions or insurance benefits; and
Supplemental Security Income (SSI) payments.
How Does Social Security Make The Reduction?
Figuring Average Current Earnings
Average current earnings are the highest of the following:
The average monthly earnings we used to figure your Social Security disability benefit.
Your average monthly earnings from any work you did (including self-employment) covered by Social Security during the five highest years in a row after 1950.
Your average monthly earnings from work or a business during the year you became disabled or in the highest year of earnings you had during the five-year period just before you became disabled. (Divide the total years earnings by 12 to get the average current earnings.)
All earnings covered by Social Security, including amounts above the maximum taxable by Social Security, can be used when figuring average current earnings.
Figuring The Reduction
Your monthly Social Security disability benefit, including benefits payable to your family members are added together with your Workers Compensation, or other public disability payment. If this sum exceeds 80% of your average current earnings, the excess amount is deducted from your Social Security benefit. But, the amount of the combined benefits you and your family receive will be less than you and your familys total Social Security benefits before they were reduced. The reduction will last until the month you reach 65 or the month your Workers Compensation an/or other public disablity payment stops, whichever comes first.
What You Must Report
It is important to contact Social Security if the amount of your Workers Compensation or other public disability payment goes up or down. The change probably will affect the amount of your Social Security benefits. If you get a lump-sum Workers Compensation or other disability payment to settle your claim, the amount of the Social Security benefits you and your family receive may be reduced. This is done by prorating the lump sum over the number of months the Workers Compensation or other public disability benefit would normally be made if you had not gotten the lump sum. The prorated amount is then added to the Social Security benefits you and your family receive. This sum is compared to 80% of your average current earnings to decide if Social Security benefits must be reduced. If your Workers Compensation or public disability payment stops, your Social Security benefit usually will increase.
IMPORTANT NOTE: The above information was excerpted from a Social Security publication and therefore should be considered to be legal advice. If you would like additional information you can call Social Security, 24 hours a day, toll-free at 800-325-0778. If you have applied or are presently receiving Social Security disability benefits and have a pending Workers Compensation claim, please contact our office at 800-437-2571 to discuss the potential effect that a Workers Compensation settlement may have on your Social Security benefits.
