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Will receiving a workers’ compensation settlement affect my SSDI?

by | Mar 4, 2022 | Disability Cases

Workers’ compensation could reduce your SSDI payment. This is true for both types of workers’ compensation settlements: lump-sum and periodic payments.

The general rule is that the combination of your SSDI and workers’ compensation payments cannot be more than 80 percent of your average earnings before you became disabled. Your average earnings are calculated using up to 35 of your working years. The Social Security Administration adds together the years with the highest indexed earnings and divides them by the total number of months for those years. Then, the average is rounded down to reach your average indexed monthly earnings (“AIME”).

You do not have to calculate your AIME yourself; it should be done for you by SSA. If you do not know how much your AIME is, you can ask SSA or check your online SSA account.

If the combination of your SSDI and workers’ compensation payments is less than 80 percent of your prior average earnings, there is no offset or reduction to your SSDI check.

When the combination of your SSDI and workers’ compensation payments is more than 80 percent of your prior average earnings, then your SSDI will be reduced until you are below the 80 percent threshold.

There are ways to minimize the offset. You can ask your workers’ compensation lawyer to exclude medical and legal expenses from the lump sum. This should be done using clear language. Another way to minimize the offset is by calculating the workers’ compensation settlement over the person’s life expectancy.

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