Jeffrey P. Gale, P.A. // Social Security Disability Offset After Florida Workers’ Compensation Settlement

dollars-254x300This previous blog — Florida Workers’ Compensation Permanent Total Disability (PTD) and the Social Security Disability (SSD) Offset — explains how workers’ compensation benefits and Social Security Disability benefits can offset each other. Today’s blog explains what happens when the workers’ compensation case settles.

Federal law (42 U.S.C sec. 424a) and Florida law allow workers’ compensation Employers/Carriers to reduce their payments to injured employees who are receiving both Social Security Disability and workers’ compensation indemnity benefits at the same time. Section 440.15(9)(a), Florida Statutes (2018), provides:

Weekly compensation benefits payable under this chapter for disability resulting from injuries to an employee who becomes eligible for benefits under 42 U.S.C. s. 423 shall be reduced to an amount whereby the sum of such compensation benefits payable under this chapter and such total benefits otherwise payable for such period to the employee and her or his dependents, had such employee not been entitled to benefits under this chapter, under 42 U.S.C. ss. 402 and 423, does not exceed 80 percent of the employee’s average weekly wage. (Bold added.)

When a Florida workers’ compensation case settles, the payment of indemnity benefits ends. Hence, the workers’ compensation carrier will no longer be taking an offset. This opens the door to the Social Security Administration to take the offset.

Steps are available to Florida workers’ compensation attorneys to reduce or eliminate the SSA offset. This is accomplished by doing a “Sciarotta Allocation.”

Sciarotta v. Bowen, 837 F.2d 135 (3d Cir. 1988) arose in the context of a post-workers’ compensation settlement SSA offset. The Social Security Administration prorated the settlement over four years, resulting in an SSD offset larger than would a proration calculated over a greater period of time. The Court of Appeals remanded to the District Court to consider the rationality of the “Social Security Administration’s [“SSA”] method of converting plaintiff’s lump sum workers’ compensation settlement to a stream of periodic payments.” Sciarotta v. Bowen, 735 F. Supp. 148 (USDC, D. New Jersey, 1989) at 149.

The District Court found that the SSA’s method was arbitrary, irrational, and “inconsistent with the express purpose of the Social Security Act.” at 154.

The takeaway from these cases is that, with proper planning, a settlement amount can be prorated over the employee’s life expectancy. Here’s an example from one of our recent workers’ compensation settlements:

Our 54 year old client sustained a significant hand injury in late 2015. He applied for and received Social Security Disability benefits. We recently settled his workers’ compensation case for $180,000. Even after this lump sum was reduced by attorney’s fees and a Medicare Set-Aside, the claimant was left with a sizeable net recovery. His life expectancy is 30 years or 1560 weeks. To arrive at the number SSA will be allowed to use to perform its offset calculation, we divided our client’s net recovery by 1560 weeks. This resulted in a much lower number than if the net was divided by, for example, the four years used in Sciarotta.

      Hypothetical illustration:

  • $100,000 divided by 1560 weeks (30 years) = $64.10.
  • $100,000 divided by 208 weeks (4 years) = $480.77

After the settlement of a workers’ compensation case, the SSA is allowed to take an offset when the combination of workers’ compensation and SSD payments exceed 80% of a person’s average current earnings (ACE). (ACE is a calculation, based on one of three formulas, used by the United States Social Security Administration to determine monthly SSD payments.) The purpose of the “Sciarotta Allocation,” as demonstrated in the hypothetical illustration, is to limit the amount of money the SSA is allowed to apply against the 80%.

Let’s assume that 80% of ACE is $2000 and that the monthly SSD benefit is $1,500. Going by the above illustration, the SSA will not get an offset where the “Sciarotta Allocation” has been applied. Without the allocation, the offset will eclipse the benefit.

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Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.

While prompt resolution of your legal matter is our goal, our approach is fundamentally different. Our clients are “people” and not “cases” or “files.” We take the time to build a relationship with our clients, realizing that only through meaningful interaction can we best serve their needs. In this manner, we have been able to best help those requiring legal representation.