Many Social Security Disability claimants started out as workers’ compensation claimants. They were injured in some way on the job, filed a workers’ compensation claim, and have been receiving medical treatment through that claim. However, it is not uncommon for an employer to convince a worker to accept a lump sum settlement for their claim, in exchange for the discontinuation of any ongoing medical benefits or payments. This prevents the matter from going to trial where an employer could end up paying significantly more than what they are offering to settle and close the matter now for.
There is a little known downside to these lump sum settlement offers in the form of its effect on Social Security Disability. Once a workers’ compensation claim is settled for a lump sum amount, and the claimant then files for Social Security Disability and that claim is approved, the Social Security Administration will offset any payment amounts by the amount of the lump sum settlement. Let’s look at an example.
Consider a worker to have been receiving $1,400 per month in workers’ compensation payments, but then decides to just accept a lump sum payment of $25,000 to settle the matter in full. If he then gets approved for Social Security Disability, the Administration will break that lump sum amount down into monthly payments. They will consider him having received that monthly amount for 17 months ($25,000/$1,400) when calculating their offset amount. This means that the amount he is approved to receive every month from SSD will be offset by $1,700 for each of 17 months. Then his SSD payment will increase to the full amount.
This offset can be negotiated in a settlement agreement drafted by an experienced attorney. For instance, considering the above example, he or she may request that only $100 be offset from each check for 250 months, rather than $1,400 for 17 months. This is the importance of having a knowledgeable attorney representing you in both workers’ compensation and Social Security Disability cases. It could mean the difference in hundreds of dollars in your pocket each month.