You can receive Social Security retirement benefits and still work. In Arizona, workers’ compensation benefits do not affect Social Security Retirement benefits.
If you are receiving Social Security Retirement benefits, the combined amount of your workers’ compensation and retirement benefits is not subject to an offset. This means that your retirement income is unaffected by workers’ compensation payments.
The Matt Fendon Law Group represents Arizona injured workers who need monthly compensation benefits and medical treatment reimbursement under workers’ compensation. In this blog post, we consider how workers’ compensation payments can interact with Social Security retirement income benefits if you are receiving them.
To learn more about Workers’ comp in Arizona and how it can affect your receipt of other benefits, call us at (800) 229-3880 or contact us online to speak with an experienced workers’ compensation attorney in a free consultation.
Can Being on Workers’ Compensation Affect Your Social Security Income?
Social Security retirement income is not subject to reduction by workers’ compensation benefits, but is subject to an indirect caveat that might apply if you have a work-related disability that keeps you from working for a prolonged period.
This is because your Social Security retirement monthly income benefit is based on your highest 35 years of employment earnings. If you are unable to work for a period of years, your lost wages might reduce your Social Security average indexed monthly earnings, which can affect your monthly Social Security retirement income.
What is the Effect of Workers’ Compensation on Social Security Disability Income?
We need to distinguish between receiving Social Security retirement income and Social Security disability income (SSDI).
The key point to understand is that, unlike Social Security retirement income, if you are disabled because of a work-related incident and are receiving Social Security disability income (SSDI), then workers’ compensation can reduce your SSDI benefits. This is known as an offset.
The purpose of the SSDI workers’ compensation offset is to keep people from receiving more in benefits than they earned before their injury. The Social Security Administration (SSA) applies the offset to make sure the combined total of your SSDI and workers’ compensation benefits is not more than 80% of your average current earnings before you became disabled.
If your combined benefits exceed this 80% threshold, the SSA will reduce your SSDI payments.
It does not matter whether your disability is work-related or not. The SSA offset still applies. This is because your SSDI is based on your work history and payroll tax contributions, not on the reason for your disability.
Workers’ Comp Lump Sum Settlements and SSDI Benefits
If you receive a lump-sum Arizona workers’ compensation settlement, the SSA may treat this as ongoing monthly income for offset purposes unless the settlement agreement includes an amortization provision spreading the lump sum payment over your actuarial table life expectancy or working years.
How is the Workers’ Compensation Social Security Disability Offset Calculated?
In calculating the workers’ compensation benefit offset, Social Security calculates a worker’s average current earnings in one of three ways:
- The Average Monthly Wage Formula. In this method, Social Security uses your average monthly wage to calculate your disability benefit amount.
- The High-Five Formula. In this method, Social Security uses the average monthly wages from your five highest-paid consecutive calendar years.
- The High-One Formula. In this method, Social Security uses the average monthly wages from your single highest-paid calendar year during the previous five years.
When determining the offset, Social Security will use whichever average earnings method is most favorable to you. Most of the time, this means it will use the High-One method. No matter which formula the SSA uses, you cannot receive more than 80% of your average current earnings because of the offset.
Are You Receiving Social Security Income Benefits and Have a Workers’ Comp Claim?
If you have been receiving Social Security retirement income and are still working, and you have a claim for Arizona workers’ compensation, you will generally not need to worry about any reduction in your Social Security retirement benefits or your workers’ compensation benefits.
However, if the source of your Social Security income is based on a disability and you are still working, and you now have a workers’ compensation claim, you cannot receive more than 80% of your average current earnings through these combined benefits. This is because of the workers’ compensation offset.
Matt Fendon Law Group represents disabled workers, and we can help you understand how this combination of benefits may affect you. We can also advise you on how other public disability benefits or private pensions may interact with workers’ compensation payments.
You can call us at (800) 229-3880 or use our online contact form to schedule a free consultation with one of our experienced Arizona workers’ compensation lawyers about your case.
