There are two main ways to get disability benefits after settling a workers’ compensation case. First, you can settle the case with a Stipulation and Award, which continues to pay ongoing benefits. Second, you can settle for a lump sum and then continue to collect Social Security Disability Insurance (SSDI) or long-term disability (LTD) benefits.
However, if you collect workers’ comp and other benefits, some of your SSDI may be offset if you receive more than 80 percent of your earnings.
Stipulation and Award
If you settle your workers’ comp claim with a Stipulation and Award, then you can keep getting disability payments. A Stipulation and Award is an agreement with the workers’ compensation insurance company. It provides ongoing payments for your:
- medical bills, and
- lost wages.
Those ongoing payments to cover your lost wages are your disability benefits. They aim to compensate you for your wage loss caused by the disabilities from the workplace injury. The amount of disability benefits provided by workers’ compensation will depend on state law. Most states provide a portion of your pre-injury wages, subject to a cap.1
However, workers’ comp settlements rarely involve a Stipulation and Award. Workers’ comp cases are generally settled with a Compromise and Release. Under a Compromise and Release, you and the workers’ comp insurer agree to a lump sum payment. This one-time payment is meant to cover any future or outstanding:
- medical expenses, and
- disability benefits.
Once a Compromise and Release is executed, your workers’ comp claim is over. You generally cannot reopen it, even if it becomes clear that the lump sum payment was too low. You also do not receive any continued disability benefits. They are all included in the lump sum payment.
Social Security Disability
If you are disabled, even if it is not from a work-related injury, you may be entitled to Social Security Disability Insurance (SSDI) payments. To receive them, however, you have to be eligible for SSDI.
To be eligible for SSDI, you must have two things:
- an eligible disability, and
- a sufficient work history.
According to the Social Security Administration (SSA), to have an eligible disability, you must:
- suffer from a physical or mental impairment that prevents you from doing your old job,
- be unable to do any other type of substantial gainful work, and
- have a medical condition that has lasted, or is expected to last, for at least 1 year.2
This is a high standard to meet for eligibility.
You must have enough work credits to have a sufficient work history to be eligible for SSDI. You earn work credits by making at least a certain wage or self-employment income in a year. The amount necessary to earn 1 work credit changes every year.3 In 2023, it is $1,640 for 1 work credit.4 You can only earn up to 4 work credits in 1 year.5
The number of work credits that you need for SSDI benefits will depend on how old you were when you became disabled:6
| Age of disability | Number of work credits required to be eligible for SSDI |
| Under 24 | 6 credits in the 3 years before the disability began |
| 24 through 30 | Credits covering half of the time between age 21 and the age the disability began |
| 31 or over | At least 20 credits in the 10 years immediately preceding the disability |
If you are eligible for SSDI, your benefits will depend on your prior income. They will not depend on the severity of your disability. The calculation is based on your average monthly income over the course of your working life.
If you are disabled but do not have enough work credits for SSDI, you may be eligible for Supplemental Security Income (SSI). This program is only for those with limited assets and low income, though.
SSDI Offset
If you receive a workers’ compensation settlement and SSDI payments, federal law caps your total compensation at 80 percent of your average current earnings.7 To prevent you from receiving more than this, the SSA will offset, or reduce, your SSDI payments. That offset can only reduce your SSDI benefits. If your workers’ comp benefits still end up being higher than 80 percent of your prior average earnings, the SSDI offset cannot reduce your workers’ comp benefits.
How the SSA does this will depend on how you settled your workers’ comp case. A workers’ compensation attorney from a reputable law firm can help mitigate this offset by structuring your lump sum settlement wisely.
After a Stipulation and Award
If you settled your workers’ comp case with a Stipulation and Award, you will receive regular disability payments through workers’ compensation. If the amount of these payments, plus your SSDI benefits, equals more than 80 percent of your average current earnings, the SSA will reduce the amount of SSDI paid. The amount that it will offset will aim to bring your total benefits below this federal cap.
After a lump sum payment from a Compromise and Release
If you settled your workers’ comp case with a Compromise and Release, you will have received your disability benefits in a lump sum payment. In these cases, the SSA will prorate your lump sum amount into monthly payments in order to determine the offset.
In some Compromise and Release settlements, the settlement agreement states the offset rate. In these cases, the rate is usually based on your life expectancy. Having a personal injury attorney at this stage in the settlement is essential.
The SSDI benefits will continue to be offset until your prorated disability payments total the lump sum settlement amount. If you reach retirement age before this, the SSDI offset will end and your SSDI disability payments turn into a retirement benefit.
Reverse Offset
Usually, when you receive both SSDI and workers’ compensation disability benefits, your SSDI benefits are reduced if the total is more than 80 percent of your prior income. However, in some states, it is your workers’ compensation benefits that get reduced, instead. This is called a reverse setoff.
The SSA only recognizes reverse offset rules that were enacted before February 18, 1981.8
Whether your SSDI or your workers’ compensation gets offset can have tax implications. By getting the legal advice of an experienced attorney, you can ensure that your workers’ compensation claim is protected from the implications of these offsets.
Long-Term Disability Insurance
You can also receive disability payments after settling a workers’ comp claim if you have long-term disability insurance, or LTD.
LTD is a type of insurance that employers can offer. It provides a portion of your salary – often 60 percent – if you cannot work due to a disability.
If you receive disability payments through both workers’ comp and your LTD insurance benefits, the LTD insurer can usually offset its benefits, similar to SSDI benefits.
Temporary vs Permanent Disability
Under workers’ comp, there are 2 general types of disabilities:
- temporary, and
- permanent.
A temporary disability is one that will go away with medical care. A permanent disability is one that will not. As you receive medical treatment, it will become clear what type you have. If an injured worker reaches maximum medical improvement (MMI) without fully recovering, doctors will determine how disabled they are. Your permanent disability benefits will depend on your disability rating.
Both temporary and permanent disabilities can be either:
- total, or
- partial.
If you cannot work at all because of your injuries, you will have a total disability. If you can work, but only in a lesser capacity, you will have a partial disability. Before reaching MMI, your total or partial disability will be considered a temporary one. Once MMI is reached, it becomes a permanent total or a permanent partial disability.
The Law in California
In California, workers’ compensation benefits include disability payments that cover two-thirds of your average weekly wage.9 This is capped at $290 per week.10
California is one of the states that use a reverse offset. If your disability benefits from SSDI and workers’ compensation total more than 80 percent of your prior wage, your workers’ comp is offset, not your Social Security Disability benefits.11
See our related articles on California workers’ comp forms or appealing a denial of benefits.
Legal References:
- See Missouri Statute 287.170 (two-thirds of the average weekly wage, capped at 105 percent of the state’s average weekly wage).
- 20 CFR 404.1505.
- 20 CFR 404.143.
- Social Security Administration, “Publication No. 05-10072: How You Earn Credits,” (Jan. 2023).
- Same.
- Same.
- 20 CFR 404.408.
- Social Security Administration, Program Operations Manual System DI 52105.001.
- California Labor Code 4658.
- https://www.dir.ca.gov/dwc/WorkersCompensationBenefits.htm
- See note 8.
