If you receive both workers' compensation and SSDI, your SSDI may be reduced through an "offset." Here's how these two programs interact.
In this article, we'll cover:
- What the workers' comp offset is
- How the offset is calculated
- When the offset applies
- Strategies to minimize impact
1. What the Workers' Comp Offset Is
The basic rule:
- Can receive both workers' comp and SSDI
- But combined amount may be limited
- SSDI reduced so total doesn't exceed 80% of prior earnings
- Called the "workers' compensation offset"
Why it exists:
- Prevent "double-dipping"
- Combined benefits shouldn't exceed work earnings
- Public policy decision
- Reduces SSDI, not workers' comp
What triggers it:
- Receiving workers' comp payments
- And SSDI at the same time
- Only affects SSDI
- SSI has different rules
The 80% rule:
- Combined can't exceed 80% of "average current earnings"
- If it does, SSDI is reduced
- Workers' comp stays the same
- You receive full workers' comp + reduced SSDI
2. How the Offset Is Calculated
Step 1: Determine "average current earnings"
- Highest of:
- Average monthly wage in high-5 consecutive years
- High-1 year within 5 years before disability
- Current monthly wages when disability began
Step 2: Calculate 80% limit
- Average current earnings x 80% = limit
- Total benefits can't exceed this
Step 3: Apply offset
- Workers' comp + full SSDI amount
- If over 80% limit, reduce SSDI
- If under 80% limit, no reduction
Example:
- Average current earnings: $4,000/month
- 80% limit: $3,200/month
- Workers' comp: $2,000/month
- Full SSDI: $1,800/month
- Combined: $3,800 (over limit)
- SSDI reduced to: $1,200
- Total received: $3,200
Important: The offset reduces your SSDI, not your workers' comp. You receive full workers' comp plus reduced SSDI.
3. When the Offset Applies
Offset applies when:
- You receive both workers' comp and SSDI
- Combined exceeds 80% of average earnings
- Continues until one benefit ends
Offset does NOT apply to:
- SSI (different rules—workers' comp is income)
- VA disability benefits
- Private disability insurance
- State disability (varies)
When offset ends:
- Workers' comp payments stop
- You reach age 65 (in most cases)
- Some states phase out offset differently
- SSDI returns to full amount
Lump-sum settlements:
- If workers' comp settles as lump sum
- SSA prorates it over expected period
- Still affects SSDI
- Complex calculations apply
4. Strategies to Minimize Impact
Understand the calculation:
- Know your average current earnings
- Calculate the 80% limit yourself
- Verify SSA's calculation
- Challenge errors
Maximize average current earnings:
- Higher earnings = higher 80% limit
- Less offset impact
- Review which calculation method used
- Request recalculation if beneficial
Consider settlement timing:
- Lump sum vs. periodic payments
- Each has different implications
- Consult with attorney
- Plan strategically
Reverse offset states:
- Some states reduce workers' comp instead of SSDI
- Including Ohio, California, others
- Check your state's rules
- Could be more favorable
Get professional help:
- Workers' comp attorney
- Disability attorney
- Financial advisor
- Complex interactions
SSI and Workers' Comp
Different rules:
- SSI doesn't have offset
- Workers' comp counts as unearned income
- Directly reduces SSI
- Could eliminate SSI eligibility
How SSI is affected:
- Workers' comp is income
- Minus $20 general exclusion
- Reduces SSI dollar-for-dollar
- May not be eligible for SSI
Example with SSI:
- Workers' comp: $800/month
- SSI would be: $967 maximum
- Counted income: $780 ($800 - $20)
- SSI reduced to: $187
After Workers' Comp Ends
What happens:
- SSDI returns to full amount
- No more offset
- Report change to SSA
- Benefits recalculated
Transition period:
- May take a month to adjust
- Verify new SSDI amount
- Report end of workers' comp
- Don't assume automatic
How Purple Helps
- Monitor both workers' comp and SSDI deposits
- Clear view of all income
- Track changes over time
- Simple record keeping
- Manage multiple income sources