Worker’s Compensation and Social Security Offset

How an offset is calculated is a confusing matter for everyone. How it is applied is often frustrating for people who receive both Worker’s Compensation benefits and Social Security Disability benefits. This post attempts to simplify the process so that you can have a basic understanding before any offset is applied to you.

The starting point is to determine whether an offset even applies. Speaking of Washington state, both state and federal law exists which limits the total in combined benefits of Worker’s Compensation payments and Social Security Disability payments not to exceed 80% of what is termed your average current earnings, or ACE. Your ACE is determined by the Social Security Administration (SSA), not by Washington State.

Certain types of benefits are exempt from this offset and include: Veterans benefits, state and local government benefits provided Social Security taxes were deducted from your earnings, and Supplement Security Income (SSI) benefits.

The monthly benefit you receive from Social Security in disability payments for you, your spouse, and your children are all part of the offset calculation, representing the total amount of Social Security Disability payments you receive. If this payment, combined with the total sum of your Worker’s Compensation benefits exceeds 80% of your ACE, then an offset which reduces your Social Security benefit is applied.

A simple example supplied on the SSA website is summarized as follows: Assume your ACE before you became disabled was $3,200 per month. Assume further that you and your spouse and children receive $2,200 per month in Social Security Disability payments. Finally, assume that you receive $2,000 per month in monthly worker’s compensation payments. In this example, the combined benefit of Social Security disability and worker’s compensation is $4,200 per month. As you can see, your combined benefit of $4,200 is $1,000 in excess of your ACE of $3,200, so your monthly Social Security Disability benefit, or Worker’s Compensation benefit in Washington State, will be reduced by the $1,000 excess.

Furthermore, you should be aware that the offset will continue to be reduced until either your Worker’s Compensation benefits stop, or you reach full retirement age.

You should not attempt to determine your ACE on your own. The SSA uses several different complicated formulas to arrive at this number and you should contact them directly for information regarding this if you have questions.

Be aware also that Washington State may apply their own offset to your monthly Worker’s Compensation, but if they do, this is no guarantee that the Social Security Administration will apply their offset as well, creating a question of which agency is properly applying the offset. Furthermore, if you receive a lump sum payment on your Worker’s Compensation claim, this too may be subject to offset by the Social Security Administration against your disability payments.

As always, if you have questions, there are many resources available to answer your questions.