Some Social Security Disability benefits received pursuant to Title II can affect amounts recovered under other federal, state, and/or private benefit policies. First, amounts received under Title II can affect a claimant’s eligibility for SSI benefits under the federal statutes or can at least reduce those amounts to a smaller amount. Since SSI is a needs-based calculation, it does not matter where the assets come from so Title II benefits definitely can affect that calculation.
Benefits paid under Title II of Social Security can also affect how much a claimant receives under a private or employer-based long-term disability plan. The effects of disability money on each plan is different due to the fact that they are separately written contracts but usually there is an awfully large offset for Social Security Disability benefits received and then claimant receives only a small monthly amount. Additionally, there are provisions in some long-term disability contracts that money paid while the claimant is applying for Social Security Disability and going through the appeals process must be paid back. Usually it is less than the amount of past due benefits after attorney fees have been paid, but it is still something that the claimant needs to be aware of because there is an obligation under the insurance contract.
As far as workers’ compensation, some states reduce the amount of state workers’ compensation benefits provided if the claimant has been deemed disabled under Social Security Disability. There is a calculation and offset that considers the amount received from Social Security and the amount to be received under the state workers’ compensation system and it is therefore correspondingly lowered. Tennessee, however, is not a state that allows for workers’ compensation insurance companies to benefit from a claimant’s Social Security Disability.
Tennessee does allow for language to be placed into workers’ compensation settlements and judgments to protect from a corresponding offset of Social Security Disability benefits.
The social theory behind workers’ compensation and Social Security Disability are replacement of lost wages for injured workers. The Social Security Administration does not want to put a worker in a position where he earns more by not working than he would if he returned to the job pool. Therefore, the regulations contain a regulation that have a calculation that looks at total monthly benefit and reduces disability benefits if a certain threshold is met. This is commonly called the Social Security Offset and it usually applies to workers’ compensation benefits paid periodically or considered to be paid periodically. A representative must first understand the monthly calculation and then understand how to lessen or alleviate the offset.
Generally, an offset applies when the combined payment of Social Security Disability and workers compensation exceeds 80% of the workers’ Average Current Earnings (ACE). 42 U.S.C. § 424(a); 20 C.F.R. § 404.408. ACE is determined by looking at three calculations used to approximate the claimant’s usual earnings. 20 C.F.R. § 404.408(c)(3). The most advantageous to the claimant is used.
To calculate the offset, the practitioner needs to know the workers’ compensation benefit calculated to a monthly amount and the claimant’s disability insurance amount. If the claimant is already approved for disability, the disability insurance amount will be readily known. If not, the file with the SSA will may contain a printout or the claimant may have a mailed update from the SSA that contains the information. The steps for determining the offset are as follows:
1. Average Current Earnings X .80 = Maximum Total Monthly Benefit
2. SSD monthly benefit (including dependent benefits) and WC monthly benefit = Total Combined Monthly Benefit.
3. Total Combined Monthly Benefit – Maximum Total Monthly Benefit = Reduction.
If Total Combined Monthly Benefit is less than Maximum Total Monthly Benefit, then there is no reduction or offset.
If the worker gets Social Security Disability before adjudication of his workers’ compensation case, then there might be an offset for the period of time when temporary total disability (TTD) is paid periodically under workers’ compensation and the past due SSD benefits and/or current monthly benefits. The representative should calculate the offset to be sure. If you represent the claimant in both the workers’ compensation case and the Social Security case you are in an advantage because you will not have to contact another attorney to get certain information.
The claimant’s disability past due benefit and hence the representative’s contingent fee may be held up until the SSA gets information about the workers’ compensation case. If the claim is approved and the representative or claimant receives information from the Payment Center requesting information about the comp case, communicate quickly and clearly with these folks. A screw up here can delay payment for all parties.
If the workers compensation case has not been adjudicated, then that needs to be relayed to the Payment Center along with when TTD ceased, which was either at MMI or return to work (RTW is less likely in these serious cases). Depending on the individual at the Social Security Administration will determine the evidence of cessation of TTD. Some will rely on a letter from the attorney’s office that represented the claimant in the WC case stating when temporary benefits ceased, while some will accept a letter from the workers’ compensation carrier or its attorney stating the same information. However, usually the Social Security Administration will require the C-23 Notice of Change or Termination of Benefits from the TDOL to prove the date when the weekly benefits ceased. Provide this to the Social Security Administration and then make sure that the date of TTD cessation, which will either be RTW (even for short period) or MMI, is stated in the Order approving workers compensation settlement or Final Judgment in a separate numbered paragraph and again where the offset language is set out.
When the claimant does receive a workers’ compensation award, the key is to maximize the total benefit the claimant receives between both systems. If the claimant receives weekly benefits under workers’ compensation, then it is most likely that disability benefits will continue to have an offset. If the claimant receives a lump-sum, then the Social Security Administration will reduce disability benefits until their amount has been paid back because the lump-sum will be treated as if paid periodically. The key then becomes to fashion the workers’ compensation settlement or award in such away that the benefits look as if they are received monthly and thus the disability offset can be reduced or eliminated if you can get below the maximum total benefit calculation.
The workers’ compensation law of the State of Tennessee allows the creation of a fiction that aids the representative in maximizing the “total pie” of benefits to be received. T.C.A. § 50-6-207(6). The lump-sum or amortized award is spread out into monthly amounts for the rest of the claimant’s projected life expectancy to lessen the offset by the SSA by getting it near or under the 80% monthly amount.
Offset language should be included in any workers’ compensation award where the claimant may apply for Social Security Disability, even if the attorney believes the disability claim may not be successful or if the disability is for a separate condition. As discussed later, workers’ compensation awards cannot be amended to protect SSD language and not doing so may be negligence and a violation of the rules. It is easy to do and thus there is no excuse for not including the language. Some firms have the practice of not letting a case be settled without the language, even if it is only a finger amputation.
The offset paragraph should contain the date of injury, date when permanent benefits began running from, cite table language, cite statutory authority, set out the lump sum, deduct attorney fees and expenses, then set out the monthly amount pertinent to Social Security Disability. If the WC settlement is over and done before disability is determined, bring in the total amount of TTD and PPD and run them from the date of injury. If Social Security Disability is awarded before the WC is over, make sure that the SSA knows when TTD is cut off, then only use PPD in lump-sum calculation for offset and run from date of MMI. In the WC order, make sure it is clear when TTD stopped and when PPD benefits began. You can maximize the deduction for the claimant and clear up issues regarding past due benefits.
The following are three examples of offset language included in workers compensation settlements and/or awards depending on the circumstances. The first is the most often employed in cases that are settled where the employee has already been approved for Social Security Disability.
Pursuant to T.C.A. § 50-6-207(6), the Court finds that the total amount of the award in this case, which will be paid in lump sum is Ninety-Five Thousand Four-Hundred Ninety-Seven Dollars and Seventy-Six Cents ($95,497.76) as compensation for permanent partial disability that will affect the Plaintiff for the rest of his life. The net amount plaintiff will recover after payment of attorney fees and costs is Seventy-Four Thousand Three Hundred and Thirty Dollars and Forty Cents ($74,730.40). The Plaintiff’s remaining life expectancy from the time of commencement of benefits, which was March 28, 2002, is 269.96 months, his age being 54 at the time of commencement of benefits and his date of birth is August 28, 1947. These calculations are in accordance with the 1980 Commissioner’s Mortality Table, as set out in the Tennessee Code Annotated, Vol. 13. Therefore, even though paid out in lump sum, the Plaintiff’s benefits shall be considered to be Two Hundred Seventy-Six Dollars and Eighty-Two Cents ($276.82) per month.
The next example of offset language is one that has been employed in workers compensation cases that have been tried and the Court awarded benefits prior to the approval of Social Security Disability. This is language that should be inserted into the order, but should the worker later be deemed to be disabled under Social Security, then it may be advantageous to negotiate a lump-sum settlement with the Defendant in the workers’ compensation case with new language in the settlement similar to example number one.
The Court further specifically finds that in the event the Plaintiff is awarded Social Security Disability benefits, then, pursuant to T.C.A. § 50-6-207(6), any workers’ compensation benefits paid either as accrued benefits at the time of payment or in the nature of a lump-sum payment now or in the future, then the lump-sum payments of either accrued benefits or lump-sum payment of commuted installment benefits shall be totaled and the Plaintiff’s remaining life expectancy shall be calculated in accordance with the 1980 Commissioner’s Mortality Table, as set out in T.C.A. Vol. 13. At that point, the benefits payable to the Plaintiff after the deduction of attorney fees and expenses shall be divided by the number of months in Plaintiff’s remaining expectancy. The figure determined to be the total amount of benefits received by the Plaintiff divided by the Plaintiff’s remaining life expectancy shall be considered to be the monthly benefit payable to the Plaintiff upon which any offset against Social Security disability shall be considered and/or computed.
This next example is language from a negotiate workers’ compensation settlement where the worker was adjudged disabled under Title II prior to the settlement of the workers’ compensation case that was obviously a permanent and total case. In that case, it was in both parties best interest to settle the claim, but instead of lump-summing the settlement, the Defendant offered an annuity. Annuity purchases in a settlement can be amortized for Social Security Disability purposes.
For Social Security purposes only, pursuant to T.C.A. § 50-6-207(6), the Court finds that looking at the lump-sum payment of $76,062.35, the attorney’s fee of $36,742.86 and the cost of the annuity to the claimant of $91,321.79, a total of $204,127.00, in light of the fact that this claim was settled for less than full value; in light of the problems stated supra; there is, as a result of these considerations and this settlement agreement, a compromised monthly benefit rate of $514.71 using the claimant’s life expectancy of 27.1 years. His date of birth is January 26, 1952. (United States Life and Death Tables, Expectation of Life and Expectation of Deaths, by Race, Sex and Age (2002), U.S. National Center for Health Statistics.) This monthly benefit rate is determined in the following manner:
Gross settlement amount: $204,127.00
Divided by claimant’s life expectancy: 27.1 years
Multiplied by the settlement of $204,127.00
less expenses (attorney’s fee of $36,742.86)
or ($167,384.14 / $204,127.00 = .82)
$627.70 X .82 $514.71
This sum represents monthly payments at the workers’ compensation benefit rate of $514.71 each month starting October 1, 2003, through the day of November 1, 2030 (325 months). Consistent with SSA POMS §DI 52001.020 Annuities and Trusts, the claimant had the option of receiving an annuity in lieu of statutory periodic benefits and elected an annuity and a lump-sum. Thus the amount of the lump-sum or purchase price of the annuity, not including interest, is considered according to the rules in DI 52001.555.
If the worker gets approved for Social Security Disability prior to adjudication or settlement of his workers’ compensation case, then you are in a situation where you have bargaining power with the Defendant in the workers’ compensation case. A worker that is permanently and totally disabled and is entitled to periodic benefits under workers’ compensation to age 65 may be better off to lump-sum a smaller amount thus reducing or eliminating the offset. This allows the Defendant employer to save and get away from their full liability.
Obviously, the offset for workers’ compensation provides opportunities for the lawyer to be creative in maximizing the benefit to the client (and hence the attorney fees), but the lawyer must be careful. If you represent only for disability claim, you will suffer also because of reduced fees if the offset language is not included. If you represent the employee in the workers’ compensation aspect, you run the risk of a professional negligence claim for not including the language.
If you need assistance applying for or appealing a Social Security Disability or SSI claim, please call John Dreiser at 865-584-1211 or 800-806-4611, or e-mail me at John@farmerdreiser.com, or visit out website at www.farmerdreiser.com. We help people with Social Security Disability and SSI claims all over East Tennessee, including people in Knoxville, Morristown, Oak Ridge, Maryville, Greeneville, Sevierville, Halls, Norris, Andersonville, Loudon, Lenoir City, Kingston, etc.
- Why a five-month waiting period for disability benefits? (seattletimes.nwsource.com)