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COORDINATING SOCIAL SECURITY
DISABILITY AND WORKERS' COMPENSATION BENEFITS
You may receive Workers' Compensation and Social Security
disability benefits at the same time, up to a combined benefit
equal to 80% of the gross income you were earning before you
became disabled.
But the
Workers' Compensation and Social Security laws determine
the amount of income you were earning before you became
disabled in very different ways.
The Social
Security Administration calculates your "average current
wage" (i.e., your income level before you became disabled)
based upon
42 U.S.C 424(a)a. Your
"average current wage" should
be the larger of the following three
numbers:
your average lifetime earnings, or
your average earning during the five
years before you became disabled, or
your average earnings during the year
before you became disabled.
Meanwhile, your "average weekly wage" for Louisiana Workers'
Compensation claims is generally based upon your wages in the four
full weeks prior to your accident or the beginning of your
illness.
While a claimant is receiving Workers'
Compensation benefits, their Social Security benefits may be
reduced ("offset") so that the combined benefits total not
more than 80% of their "average current wage" as determined by
the Social Security Administration. The exception to this rule
is that the claimant's employer may request that the offset be
reversed if the Louisiana Workers' Compensation Court
determines that the claimant is permanently totally disabled.
The Social Security offset can become a very
important issue when a Workers' Compensation claim is settled
because the Social Security Administration may treat the
lump-sum settlement as a replacement for periodic benefits.
SSA may pro rate the amount of the settlement at the same rate
that the claimant was receiving Workers' Compensation wage benefits before the settlement.
Specifically, Social Security
applies the first appropriate option:
- 1. The rate
specified in the lump-sum award, or
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- 2. The periodic
rate paid prior to the lump sum (if no rate is specified in
the lump-sum award).
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- 3. The state's
Workers' Compensation maximum in effect in the year of
injury. This figure can be used if no rate is specified in
the award or there were no periodic benefits paid prior to the
settlement.
The net effect is that a claimant's Social
Security benefits will continue at the pre-settlement (offset)
rate though the claimant is no longer receiving Workers'
Compensation indemnity benefits. This can be particularly
painful where the claimant has used a significant portion of
their Workers' Compensation settlement to satisfy debts that
they incurred while their claim was pending.
To address this problem,
Social Security Ruling 87-21c allows the claimant and his
employer to stipulate in the Joint Settlement Petition that
the amount paid in the lump-sum settlement of the Workers'
Compensation claim is intended to compensate the claimant for
his lost wages (or loss of earning capacity) over his entire
remaining work-life (based upon standard life-expectancy
tables). The settlement documents should explicitly state the
term and imputed periodic rate of the lump-sum settlement.
In the typical settlement of a disputed
Louisiana Workers' Compensation claim, the appropriate
stipulation in the Joint Settlement Petition and corresponding
Order should substantially reduce or eliminate the Social
Security offset.
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