If an individual receives Worker’s Compensation benefits, their entitlement to Social Security Disability benefits may be reduced or eliminated. An individual can only receive 80% of their prior earnings in the combination of Worker’s Compensation cash benefits and Social Security Disability benefits.
How the Social Security Administration (SSA) Determines Prior Earnings
The SSA utilizes a variety of formulas to determine prior earnings. Generally, they use the highest of following numbers:
- The highest yearly income of the five calendar years immediately prior to the onset of disability and entitlement to disability benefits.
- An average of the five highest consecutive years of an individual’s entire work history.
This amount is called an Average Current Earnings (ACE) and is computed on a monthly basis. An individual is allowed to collect 80% of that monthly ACE amount in the combination of Worker’s Compensation (or public disability) benefits.
How the Worker’s Compensation Offset Affects Social Security Disability Benefits
Here’s an example:
Next, add the their monthly Social Security Disability benefits and their Worker’s Compensation benefits. If the individual is receiving $1,500 per month in Workers Compensation benefits and $1,500 in Social Security Disability benefits, their total monthly benefit is $3,000.
Then, subtract the 80% maximum amount of benefit from the total monthly benefit to get the offset amount. In this example, $3,000 minus $2,400 equals a $600 offset.
Finally, subtract the offset amount from the monthly Social Security Disability benefit. The $1,500 Social Security Disability benefit would be reduced by $600, and the monthly benefit equals $900.
If you have questions about your Social Security benefits or if you qualify for benefits, contact us at Match & Farnsworth a free evaluation.