How Does Work Comp Affect Social Security Retirement Benefits?

If you’ve been injured at work, you may be eligible to collect both workers' compensation benefits and Social Security retirement benefits. But do you know how they affect one another?

Table of Contents

In this article, we'll help you get a better understanding through answering the most common questions on workers' compensation insurance and Social Security insurance:

How does workers' compensation affect Social Security retirement benefits?
Will I lose my workers’ comp benefits by applying for SSDI?
What is the difference between workers' comp and SSDI?
If workers' compensation does not cover my injuries, what will?

Bear in mind, this article is designed for those unfamiliar with workers' comp. Because of this, consulting an independent insurance agent can help you fully understand state laws, compensation amounts, insurance alternatives, and much more.

How does workers' compensation affect Social Security retirement benefits?

Let’s be clear: Receiving workers' compensation insurance can reduce your Social Security retirement benefits in a number of ways.

So let’s take a look at a number of drawbacks and considerations about receiving workers’ compensation benefits while also claiming Social Security benefits such as Social Security Disability Insurance (SSDI) and Social Security Insurance (SSI):

• The total income you receive from workers' compensation and SSDI cannot be more than 80% of your previous income. If the combined amounts are more than 80%, a workers’ comp offset will be applied to that amount to reduce SSDI benefits. Unless there’s a change in your workers’ comp benefit amounts, your SSDI payments will remain at the reduced amount until you reach retirement at age 65 or your workers’ compensation payments cease. 
• If your workers' compensation benefits run out while you're still collecting SSDI, be sure to notify the Social Security Administration to adjust your SSDI benefits in accordance with your current income levels. Not doing so can leave individuals with significantly less income in retirement.
• Remember, SSI is a needs-based program which is geared toward individuals who have limited assets and resources in their retirement. In most cases, receiving large workers’ compensation settlements will disqualify individuals from receiving SSI benefits, so the ability to collect both types of benefits is rare. 
• Also, if you’re trying to settle your workers’ comp case through a lump-sum settlement, collecting SSI/SSDI may ultimately reduce the value of your case, especially in regard to lost wages/indemnity benefits. For these reasons, it may be important to consult an attorney who specializes in these cases. 

Of course, this is only a brief introduction to how these benefits interact. Considering that each state has its own rules and limitations regarding their own workers’ comp programs, it can be a confusing process to understand and time-consuming to navigate. 

If you have any questions about how Social Security benefits and workers' compensation benefits interact, consult an independent insurance agent. Independent insurance agents can help you understand how state-run and federal programs work in the simplest terms while providing alternatives to reduce any benefits offsets that may occur. 

Will I lose my workers’ comp benefits by applying for SSDI?

In most cases, workers’ comp benefits will not be affected by applying for SSDI benefits. But you will want to consult an attorney or independent insurance agent who can tell you which types of benefits you should apply for first or when the best time to do so is. 

If you have an ongoing workers’ comp case that's under review, you may not want to apply for SSDI benefits while the case is being investigated. This may trigger your former employer to launch their own investigation into your ability to work and so forth. 

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What's the difference between workers' comp and SSDI?

While both programs are designed to help injured workers and their families, there are a few notable differences between workers’ compensation insurance and Social Security Disability Insurance (SSDI):

First, workers’ compensation is mainly a state-run program, while SSDI is run by the Social Security Administration, a federal entity. There are federal workers’ comp programs offered to government workers, as well, but those benefits are distributed through the US Department of Labor’s Office of Workers' Compensation Programs.

Second, the requirements for qualifying for workers’ comp and SSDI are different. To qualify for workers’ comp, most individuals are determined to be no longer capable of performing the job they were once able to do before an injury or illness. There’s no time frame for how short or long workers’ compensation payments may last, as they are determined on a case-by-case basis in accordance with state guidelines. 

To qualify for SSDI, you must be considered totally disabled, demonstrating that you cannot perform any work that you’ve ever performed for any previous employer or that you could be reasonably trained for. Also, to receive SSDI benefits, your disability must be expected to last over a year or eventually result in your death.

Third, the intended purpose of each program is different. In most cases, workers' comp is designed to be temporary, providing injured employees with temporary income while recuperating or waiting for acceptance for SSDI benefits. SSDI benefits are generally considered long-term benefits for injured individuals who cannot reenter the workforce for the duration of their lives. 

If you plan on receiving both workers' compensation and SSDI, it is strongly advised that you speak with an independent insurance agent who is experienced working with both workers' comp and Social Security Disability claims. Every case is different, and the laws regarding benefits change often, so having an independent insurance agent helps you get the benefits you deserve. 

If workers' compensation doesn't cover my injuries, what will?

If you’re looking for alternative sources of income in the event that you experience a work-related injury or illness, you may want to purchase private insurance policies.

In contrast with state and federally run programs, private insurance does not have any effect on how much you can receive from SSDI benefits. This can help individuals who may outlive their workers’ comp settlements or experience growing health needs in the future without experiencing a dramatic offset in SSDI benefits. 

Be sure to discuss the following types of private insurance policies and investment vehicles with an independent insurance agent:

• Life insurance
• Short-term disability insurance
• Long-term disability insurance
• Long-term care (LTC) insurance
• Joint-life annuities
• And more

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