Work related injuries often result in severe limitations. Worker’s Compensation benefits are payable to the injured worker for lost wages and medical treatment. If the limitations are severe enough, the employee may be found to be permanently and totally disabled”. In many states, like Florida, benefits are paid for a pre-determine amount of time based on the percentage of disability. If a person is found by the doctor to have a 20% disability rating, benefits are paid for 3 weeks per percentage point. A 20% rating would pay for 60 weeks. (Approximations for demonstration purposes) If the 20% disability results in permanent limitations that prevent the ability to work full-time, a claim for Total and Permanent Disability benefits against the Workers’ Compensation carrier should be filed.
The same injury that resulted in a 20% disability rating can produce a significant amount of pain and limitations. If these symptoms and limitations are severe enough, the person could be found eligible for Social Security disability benefits. It happens more often than imaginable. The financial impact of this dual entitlement is so staggering that careful planning is .required.
When the injured worker sits down to plan for the loss of his income, there are many things he must keep in mind. The WC benefits are not guaranteed. A low disability rating could result in less than a year of benefits. Any earnings from work activity will affect his future checks. Attempting to work can also result in a suspension of benefit. Many people trying to make a little money to supplement the WC check find themselves accused of fraud. The injured worker doesn’t have many options.
Enter Social Security disability benefits. This federal entitlement program gives financial relief and peace of mind to the injured worker while enduring the recovery process. The combination of the benefits provide a much sturdier safety net.
1.)The combination of WC and SSD benefits increases the monthly benefits from 66% to 80% of the injured worker’s pre-injury wage.
2.)SSD provides entitlement to Medicare benefits. Medicare coverage will cover non-work related illnesses or injuries.
3.) Entitlement to Social Security disability changes the financial complexion of the W.C. case especially in States that equate SSD entitlement with Total and Permanent disability status.(e.g. Florida)
A person who is receiving biweekly of monthly WC payments of $500 per month, found to have a 15% impairment rating receives $22,500 at the point the doctor finds the injured worker has reached maximum medical improvement or MMI. That is the extent of compensation paid to the injured worker .
That same worker becomes entitles to Social Security disability benefits as well. At that point, impairment ratings are no longer relevant in determining future compensation.. Chances are the worker will be found “permanently and totally disabled” by the WC insurance company. When the WC company accepts the worker as Permanently and Totally disabled, he is entitled to monthly or weekly benefits until age 65. As mentioned earlier, Florida had a provision written in the WC statutes equating entitlement to Social Security disability with “permanent and total disability” rating.
It is definitely to the advantage of the injured worker to obtain Social Security disability benefits. There is a greater chance that the insurance company will find he is “totally and permanently” disabled, a designation that increases the companies liability. The insurance company’s liability, which would have been counted in weeks, is now counted in years.
There is a dramatic affect on the negotiation of Worker’s compensation settlements. The amount of money offered on a case where the worker has a 15% impairment rating is ten times less than the amount demanded by the worker who has a “permanent and total disability rating”. After all, the WC Company is liable for the workers wage loss until age 65.
Congress placed a limit on the amount of money a person on both WC and Social Security disability can receive. WC benefits generally pay 66% of the workers pre-injury wages. If SSD is awarded, the worker receives 80% of pre-injury earnings in a combination of benefits. In most states, any money in excess of the 80% cap is deducted from their Social Security check. In some states, like Florida, the excess is subtracted from the WC check.
Many Worker’s Compensation cases are resolved through a settlement Instead of paying wage loss to the injured worker monthly, an offer is made by either party for the payment of a large lump sum amount. The settlement agreement relinquishes the WC carrier’s responsibility to pay monthly wage loss in exchange for a large lump sum payment to the injured worker. This results in a satisfactory resolution for both parties.
The Impact of a Lump Sum Settlement on the Injured Workers Social Security Disability Benefits.
SSA is very interested in the settlement agreements in WC cases. It is very important to use some foresight in composing the settlement agreement. Unless specific language is used in the agreement, future Social Security benefits are at risk.
Case Study: An injured worker is receiving a monthly check from his employer through the WC insurance company. He also receives a monthly check from SSD. His pre-injury earnings were $2000 per month. The maximum amount the injured worker can receive in WC and SSD benefits is $1600.00 per month. He receives 66% of his prior earnings in wage loss or $1320.00 from WC.. Since he is only entitled to a maximum of $1600 in a combination of WC and SSD, he receives a reduced SSD check for $280.00.
The WC company offers the injured worker $100,000.00 in a lump sum payment. This may seem like a good settlement. The injured worker would have a large sum of money as well as monthly SSD checks. How would my monthly SSD be at risk?. The answer is related to the law that limits the combination of WC and SSD to no more than 80% of pre-injury earnings.
When an injured worker accepts a lump sum settlement to replace wage loss benefits owed to him over his lifetime, SSA still requires that the worker’s settlement and the SSD monthly benefit do not exceed 80% of pre-injury earnings.
SSA requires the WC insurance company complete a Workers’ compensation/Public Disability Questionnaire. This questionnaire contains the amount of the settlement and the amount of the monthly benefits paid to the worker before the settlement. Prior to the settlement, the injured worker was receiving WC benefits equal to 66% of pre-injury earnings and reduced SSD benefits (to insure the total benefit did not exceed 80% of pre-injury earnings).When the monthly WC wage loss ends due to the settlement, the SSD benefit continues at it’s reduced rate. SSA divides the settlement amount by the monthly wage loss previously paid to the worker. This calculation provides SSA with the number of months the reduced SSD is payable before it can be raised to the regular monthly benefit.
If the injured worker was receiving $1000.00 a month in wage loss, a settlement of $100,000 would allow SSA to continue to pay reduced benefits for 100 months. Some injured workers assumed that once their monthly wage loss ends, SSA would increase their SSD to full benefits. If SSA is allowed to assume that the lump sum settlement is related of the monthly wage loss, the injured worker will have their monthly SSD reduced until the number of months have elapsed based on the above formula.. SSA would pay reduced benefits of $600.00 for 100 months based on this settlement.
There is a solution to this scenario. As mentioned earlier, some foresight must be used in designing the settlement. As long as the settlement contains language to the effect that the lump sum is paid in consideration of the number of months in the worker’s life expectancy, (according to the U.S. Life Tables) SSA can not use the formula that divides the lump sum by the monthly benefit. Instead, the settlement makes it clear that the lump sum is being paid in consideration of the number of months in the worker’s life expectancy.
The worker settles the case when he is 48 years old. The U.S. Life Tables indicate a life expectancy of 78 years. When you divide the lump sum of $100,000 by 360 months (the number of months of his life expectancy) the sum is $277.00. According to the settlement language, the lump sum represents $277.00 a month over his life expectancy. The injured worker’s cap on benefits is $1600.00 per month. The lump sum represents $277.00 per month. SSA must pay the claimant $1323.00 per month before the total benefits exceed 80% of pre-injury earnings. A properly worded settlement agreement can mean the difference between receiving only $600.00 per month in SSD and $1323.00.
It is important to remember to tell your WC attorney to make sure the lump sum is designated as paid over life expectancy. If you get a strange look, find yourself another attorney.
The lesson to remember is apply for Social Security disability if you are entitled to worker’s compensation. The requirements for eligibility for Social Security disability is the inability to work full-time as a result of a medical condition that will last at least 12 months or more. The definition of disability does not require total disability or permanent disability. It may be easier than meeting the WC definition of “permanent and total” disability. If you qualify for SSD benefits, proving entitlement to total disability from WC increases the value of the case.
When it comes time to discuss settlement, make sure the agreement equates the lump sum with the injured workers life expectancy.