Disability and Workers’ Compensation: How Social Security Offsets Lump Sum Settlements

Posted on August 21st, 2013

In continuing our series on workers’ compensation and Social Security Disability Benefits, Eric Buchanan & Associates wants you to know how worker’s compensation lump sum settlements are considered by Social Security.

Lump sum settlement in workers’ compensation cases are one choice workers sometimes have instead of taking a monthly payment. Many workers’ compensation claims are settled before a hearing or trial, and claimants often like the immediate lump sum settlement rather than having to wait every month for their money to arrive. The Social Security Administration (SSA) is aware of the lump sum type of payment and “budgets” the settlement by offsetting SSDI benefits to account for a large sum paid to the claimant.

The SSA will look at the language of the settlement document and use a basic conversion method to figure out the new monthly disability benefit amount. SSA will divide the lump sum by the periodic worker’s compensation payment that the person had been receiving, and then applying the SSDI offset for the remaining months.

However, if your workers’ compensation attorney includes language spreading the lump sum out over the rest of your life, then SSA will apply a much lower offset, which can increase the amount of your Social Security benefits without reducing the amount of your workers’ compensation settlement.  If you workers’ compensation attorney does not know what language to put it, ask your attorney to contact our office, and we can provide that language, or ask your attorney to read the article on our website here.