Good morning Rita,
I'm Doug, and I'm very sorry to hear of your situation. My goal is to provide you with excellent service today.
A long term disability insurance company may legally provide that eligible payment recipients apply for SSDI when they are eligible, and this is often a requirement written into the policy.
Yes, the receipt of workers' compensation benefits does have an affect on the SSDI that you will receive.
The 1965 Social Security Amendments required that Disability Insurance benefits be reduced when the worker is also eligible for periodic or lump-sum workers' compensation payments, so that the combined amount of workers' compensation and Social Security disability benefits does not exceed 80 percent of the worker's average current earnings. The combined payments after the reduction, however, will never be less than the amount of total Social Security disability benefits before the reduction. Average current earnings are defined as the highest of:
1. The average monthly wage on which the unindexed disability primary insurance amount is based,
- The average monthly earnings from covered employment and self-employment during the highest 5 consecutive years after 1950, or
- The average monthly earnings in the calendar year of highest earnings from covered employment during the 5 years ending with the year in which disability began.
The lump-sum settlement can be in the form of a commutation or compromise agreement and releases the insurance company or the employer from liability. Such a settlement is a substitute for periodic payments and is subject to the offset. In this situation, the lump-sum is prorated to reflect the monthly rate that would have been paid had the lump-sum award not been made.
In order to minimize any negative effect, it is very important that the worker's compensation compromise Order contain Social Security life expectancy language. This language has no effect on the amount of the worker's compensation settlement itself; all it does is preserve Social Security benefits to the greatest extent possible. The obligations of the employer and insurance company are not changed at all by the inclusion of the language.
The necessary language is as follows, and you must demand that it be included in ANY settlement document that you sign with workers’ compensation:
After payment of the attorney's fees and costs, the claimant will receive the net amount of $____________. The mortality tables set forth in (your state) Code indicates that because the Applicant is age ______, Applicant has a life expectancy of ________ years and ______ months. The amortized monthly benefit received by the Applicant is $_____________ divided by _________ months or $_____________ per month and represents a future income replacement. This paragraph is intended for Federal Social Security purposes only and not for any other purpose.
It is very critical that when preparing the final Compromise and Release of your workers' compensation claim, that you ensure that you have a seasoned workers' compensation/social security attorney review the release and ensure that the necessary language is inserted in the release to best protect you and your future SSDI benefits so that the very minimum is subject to offset.
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