November 29, 2010
WORKERS' COMPENSATION AND SOCIAL SECURITY PAYMENTS
By: Lee R. Hansen, Legislative Analyst II
You asked for an explanation of how Social Security payments are considered when determining a claimant's Workers' Compensation payments.
The “Social Security offset,” a policy that reduced Workers' Compensation wage replacement benefits by the amount of Social Security retirement benefits a claimant received, ended with the enactment of PA 06-84 on May 30, 2006. However, since benefit amounts are controlled by the prevailing law at the time of injury, any benefits for injuries that occurred between 1993 and 2006 are still subject to the offset. Prior to 1993, the law did not provide for an offset.
But, under certain circumstances Social Security disability and Workers' Compensation benefits can be used to offset each other when determining benefits received.
THE SOCIAL SECURITY OFFSET
Prior to 1993, Social Security retirement benefits played no role in determining Workers' Compensation wage replacement benefits. However, PA 93-228 introduced the Social Security offset as one of a number of changes intended to reduce the Workers' Compensation system's cost. The offset reduced a claimant's Workers' Compensation wage replacement benefit by the amount of Social Security retirement benefits a claimant received.
Proponents of the offset believed that it lowered Workers' Compensation costs and kept claimants from receiving a “double benefit” from Workers' Compensation and Social Security that would discourage them from returning to work. Opponents argued that seniors collecting Social Security retirement benefits often had to continue working in order to earn sufficient income. They believed that if these seniors were injured on the job they deserved standard Workers' Compensation benefits and should not be penalized for having to work. Please see OLR Reports 2003-R-0724, 2001-R-0613, and 2001-R-0479 for more detailed descriptions of the offset's legislative history and subsequent attempts to repeal it.
After numerous attempts to repeal the offset, PA 06-84 eliminated it in 2006. However, the change applies only to injuries occurring after the act's passage on May 30, 2006 and not retroactively. Thus, Workers' Compensation benefits for any injuries that occurred between 1993 and 2006 continue to be reduced by the amount of Social Security retirement benefits a claimant receives.
Although the offset for Social Security retirement benefits no longer exists for determining Workers' Compensation payments, other Social Security and Workers' Compensation payments can offset each other under particular circumstances. For example, the Social Security Administration will reduce a claimant's Social Security Disability Insurance (SSDI) benefit by the amount of Workers' Compensation benefits the claimant receives. For further details on the SSDI reduction, please see OLR Report 2001-R-0691.
Former state employees on disability retirement can receive benefits from a number of sources, including their disability pensions, SSDI, and Workers' Compensation. However, the total of all benefits cannot exceed 80% of the employee's pay at the time of injury. If the total benefits exceed the 80% limit, the disability retirement benefit is decreased to bring the total benefits down to the 80% maximum. For further details on the state disability pension reduction, please see OLR Report 2007-R-0558.