Attorneys who practice Social Security and Worker's Compensation law have long recognized the confusion caused by Social Security's application of the regulations providing for an offset (reduction in amount of Social Security Payment for a period of time) of Social Security Disability Insurance Benefits due to receipt of Worker's Compensation Lump Sum Settlements by the disabled wage earner.
The regulations of the Social Security provide for different methods of proration of the settlement, including pro-rating the settlement over the life expectancy of the applicant (if that language is included in the settlement at the time that it is initially approved by the Worker's Compensation Board). However, Social Security will not accept any subsequent amendment for that purpose (Social Security Ruling 97 3p).
Life Time Proration
Sometimes, even though the Worker's Compensation attorney will properly arrange for large lump sum settlements for permanent partial or total disability to be prorated using the claimant's life expectancy, and carefully state that the resulting number was a periodic worker's compensation payment used in the settlement. Social Security has on occasion incorrectly not accepted the life time proration.
The Administration's reaction to this technique (life time pro-ration) was inconsistent depending on the jurisdiction and component of Social Security involved. Sometimes, they would insist on this pro ration using computations to age 65, while in other instances they would accept the lifetime proration, and sometimes they incorrectly applied the weekly payment that the applicant received as temporary disability. This would at the very least result in protracted appeals for the applicant, and could result in a greater offset if ultimately disallowed.
In order to prevent any ongoing controversy, and possible inaccurate offset's to the detriment of it's disabled workers, the Missouri Legislature very wisely in consultation with both it's Worker's Compensation and Social Security Bar recently addressed this issue by amending Section 287.20, R.S. Mo., part of chapter of Missouri statues regarding workers compensation law. The new Subsection 9 provides in part;
"The parties by agreement and with approval of an administrative law judge, legal advisor or the commission, may enter into a compromise lump sum settlement in either permanent total or permanent partial disability cases which prorates the lump sum over the life expectancy of the injured worker. When such an agreement has been approved, neither the weekly compensation rate paid throughout the case nor the maximum statutory weekly rate applicable to the injury shall apply. No compensation rate shall exceed the maximum statutory weekly rate as of the date of the injury. Instead the pro rated rate set forth in the approved settlement documents shall control and become the rate for the case. This section shall have retroactive effect."
According to N.O.S.S.C.R. (National Organization of Social Security Claimant's Representatives), the Social Security Administration has agreed to honor this statutory amendment in computing worker's compensation offsets based on Missouri settlements. They reported that the administration had issued instructions to all adjudicators "that Missouri LS (lump sum) awards must be pro rated using a life expectancy rate if it is specified in the original LS award."
It has been suggested that this Missouri statutory amendment may serve as a model to other states to protect the Social Security Disability benefits of workers who suffer on the job accidents. At this time what is most important is that an individual who is currently applying for or receiving Social Security Disability Benefits and has a Worker's Compensation claim make sure that both their Worker's Compensation and Social Security Disability attorneys are aware of both claims and carefully review what impact settlement of the Worker's Compensation case will have on their Social Security Disability benefits before the Worker's Compensation case is settled.
Assisting Claimants
In order to assist the claimant, the attorney should be provided with the amount of Social Security Disability benefits that the claimant and family members received when they the wage earner was first placed on Social Security Disability. The attorney will also need to know the yearly amount that the wage earner earned prior to being placed on Social Security Disability. This is because the total monthly benefit amount that the Social Security recipient may receive can be as high as 80% of the disabled wage earners pre-disability earnings. In many instances, life time proration language can reduce the impact that a potential Worker's Compensation Case settlement may have on their Social Security Disability payment by incorporating in appropriate instances "life time proration" language in the settlement.
Just as each state's worker's compensation system is different, Social Security's actions with regards to offset's differs state by state. Although the above information is correct in the majority of states including California. Several other states are "reverse offset" states in which the Offset (reduction in benefits) is a reduction of the Worker's Compensation benefits, rather that a reduction of Social Security Benefits. Your Social Security Disability and or Worker's Compensation attorney can tell you about your particular state.