Can You Get SSDI and Workers’ Comp at the Same Time?

You can receive SSDI and workers’ compensation at the same time, but if the two together are more than 80% of your average earnings before you became disabled, Social Security reduces your SSDI by the excess. Benefits paid to your spouse and children on your record count toward the total. The reduction continues until you reach full retirement age or your workers’ compensation stops, whichever comes first.

Most people who receive both are not reduced at all. Of about 348,000 disabled workers on SSDI who had filed for workers’ compensation or public disability benefits at the end of 2024, 68% had no offset because their combined benefits stayed under the limit, and about 6.5% lived where the state reduces its own payment instead. Roughly one in seven had their SSDI reduced.

How the offset is calculated

Social Security adds your family’s monthly SSDI to your monthly workers’ compensation or public disability benefit and compares the total with a limit. The limit is the higher of two amounts: 80% of your average current earnings, or your family’s total SSDI before any reduction. If the combined benefits exceed the limit, SSDI is reduced by the difference, but never below zero.

Social Security’s own example: a worker whose average current earnings were $4,000 a month qualifies for $2,200 a month in SSDI for the family and receives $2,000 a month in workers’ compensation. Eighty percent of $4,000 is $3,200, and the combined $4,200 is $1,000 over it, so the family’s SSDI is reduced by $1,000. When the reduction applies to a family, benefits for the spouse and children are reduced first, in proportion, and only the remaining reduction comes out of the worker’s own benefit.

Average current earnings are not the weekly wage used by your workers’ compensation case. Social Security computes them from its own earnings record and uses whichever of three figures is highest:

• one-sixtieth of your earnings in your highest five consecutive years, counting earnings above the Social Security tax cap;
• one-twelfth of your earnings in your single highest year among the year you became disabled and the five years before it;
• an older average monthly wage figure used in some benefit calculations.

Because the highest of the three is used, and because a single strong year can set the limit, people whose earnings dropped before they stopped working can find the offset smaller than they feared.

What counts and what does not

The offset applies to periodic workers’ compensation for total or partial disability, temporary or permanent, under any federal or state law, including payments to federal employees and Black Lung benefits. It also applies to public disability benefits paid by federal, state or local governments for conditions that are not job-related, such as state temporary disability benefits and some civil service disability pensions.

It does not apply to Veterans Affairs benefits, to state or local government disability benefits from jobs where you paid Social Security tax, to needs-based benefits such as SSI, or to private disability insurance and private pensions. Private long-term disability works the other way around, with the insurer reducing its own payment.

Medical, legal and related expenses connected with your workers’ compensation claim are subtracted before the offset is figured, whether they were paid from a monthly award or a settlement, as long as they are documented. That includes the attorney fee you paid to win the workers’ compensation case.

States that reduce workers’ comp instead

In some states the law reduces workers’ compensation when the worker receives SSDI, and when that law was in place by February 18, 1981, Social Security pays SSDI in full instead. These are called reverse offset states. For workers’ compensation they are Alaska, California, Colorado, Florida, Louisiana, Minnesota, Montana, New Jersey, New York, North Dakota, Ohio, Oregon, Washington and Wisconsin. For public disability benefits they are Hawaii, Illinois, New Jersey, New York and Puerto Rico.

Two details matter. What counts is the state paying the benefit, not the state where you live. And each state’s law covers only certain types of payments, such as temporary total or permanent total disability, so a worker in a reverse offset state can still have an SSDI offset for another type of benefit or for federal workers’ compensation. Nevada’s plan took effect after the 1981 cutoff and is not recognized.

Lump-sum settlements

A lump-sum settlement does not escape the offset. Social Security spreads it over a period of months, after removing excluded expenses, and offsets SSDI during that period as if the money had been paid monthly. The rate it uses follows a set order: a rate stated in the settlement, a rate based on your life expectancy if the settlement states one, the last periodic rate you were paid, a rate the settlement implies, or the state’s maximum weekly benefit.

The settlement wording can change the result dramatically. A $100,000 settlement prorated at a $500 weekly rate covers about 200 weeks, roughly four years, and could reduce SSDI heavily during that time. The same settlement stated as spread over a life expectancy of 2,000 weeks works out to $50 a week, which may produce little or no offset. Social Security accepts life expectancy proration when the settlement states it, and it compares the methods to use the one most favorable to you. Lump sums are reviewed closely, so any proration language should be in the settlement or an approved addendum before it is signed, and your workers’ compensation attorney should know about your SSDI claim. Paying off private debts, child support or taxes from the settlement does not reduce the amount counted.

Watch out: A check that only brings late weekly payments up to date is not a lump-sum settlement and will not be prorated over your life expectancy. If your settlement is approaching, raise the SSDI offset before the agreement is final; changing the wording afterward is much harder.

Reporting and when the offset changes

Tell Social Security when you start receiving workers’ compensation, when the amount changes, when you receive a lump sum, and when payments stop. Send proof such as the award, the settlement or a letter showing the final payment date. Until the stop date is on record, the offset continues, and if Social Security learns of benefits late, the months already paid can become an overpayment.

The offset also eases over time. In the second year after it starts, and every third year after that, Social Security recalculates the limit by raising your average current earnings with national wage growth. The new amount takes effect in January and can only increase what you are paid. The offset ends entirely at full retirement age, when SSDI becomes retirement benefits.

Taxes

Workers’ compensation paid under a workers’ compensation law is fully exempt from federal income tax. The exception is the part of it that reduced your SSDI: the IRS treats that amount as Social Security benefits, and your Form SSA-1099 includes the offset in the benefits paid. That portion is taxable only to the extent Social Security benefits are taxable for you.

Applying for SSDI while on workers’ comp

You can apply for SSDI while receiving workers’ compensation, and you usually should if your condition is expected to last at least a year, because SSDI can continue long after workers’ compensation ends. The two programs use different standards: workers’ compensation asks whether a work injury limits you, while SSDI asks whether any condition prevents you from doing any substantial work. The offset also applies to back pay for months in which you received both.