Filing a workers’ comp claim is never ideal. But since an injury can impact your ability to work and earn a living, you likely need workers’ comp benefits. And the issue’s even more confusing if you also get Social Security disability benefits. That’s because receiving both workers’ compensation and other disability benefits can reduce Social Security benefits. This is known as the workers compensation offset. Learn how this workers compensation offset rule can affect Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) below.
What Is the Workers Compensation Offset Rule?
Employees with on-the-job injuries or illnesses may qualify for workers’ compensation benefits. Federal or state agencies, employers, or insurance companies pay workers’ comp benefits until injured workers can go back to their jobs again.
Some workers who are eligible for Social Security disability benefits (SSDI or SSI) may also qualify for workers’ comp. But since both are government programs, workers can’t receive full Social Security benefits and workers’ compensation at the same time. That’s because the workers compensation offset rule won’t allow that to happen.
Effective since 1965, the workers compensation offset essentially rules out paying “excessive” benefits to any one person. In other words, if you qualify for both workers’ comp and Social Security disability, the workers compensation offset reduces one payment. The amount you get paid in workers’ compensation and Social Security disability benefits combined cannot exceed 80% of your average current earnings. But your combined payments after applying the workers compensation offset will never total less than your current Social Security disability check.
You should know that this rule only applies to federal and state-issued workers’ comp benefits. Many companies offer private pensions or insurance benefits beyond WC payments. In those cases, the workers compensation offset rule doesn’t apply and won’t affect your Social Security benefits.
Will You Owe Taxes Under the Workers Compensation Offset Rule?
The Social Security Administration’s workers compensation offset rules are complicated. Workers’ comp programs vary from state to state for anyone who isn’t a federal employee. Each state has its own workers’ comp rules about what injuries may qualify. Benefit types and categories also change at the state level for workers injured on the job. Certain jurisdictions have a higher percentage of workers with a connection to workers’ comp or SSDI benefits. These include California, Puerto Rico, Rhode Island, and West Virginia.
It’s important to note that in most cases, workers’ compensation benefits are not taxable. Of course, there’s an exception to this rule if you’re receiving SSDI or SSI payments as well as workers’ comp. If you get disability payments plus workers’ comp, you will owe taxes on workers’ comp. But an experienced workers’ comp lawyer can help you minimize your losses.
In some cases, Social Security disability benefits are taxable. It all depends on where you live and your total household income when you file your annual tax return.
You May Qualify for Legal Assistance
We can help you connect with an experienced workers’ comp lawyer or advocate to help you with your claim. If you qualify for legal assistance, a lawyer can help you file your workers’ comp claim or handle your appeal. All our workers’ comp lawyers work on contingency, so you’ll pay nothing to meet for claim advice in private. You can ask questions about your specific situation, and don’t have to pay the lawyer anything unless you win benefits
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Mandy Voisin is a freelance writer, blogger, and author of Girls of the Ocean and Star of Deliverance. As an accomplished content marketing consultant, mom of four and doctor's wife, Mandy has written hundreds of articles about dangerous drugs and medical devices, medical issues that impact disabled Americans, veterans' healthcare and workers' compensation issues since 2016.