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How Does a Lump Sum Settlement Affect Social Security Disability?

How Does a Lump Sum Settlement Affect Social Security Disability.

If you experienced a debilitating injury at work, you may qualify for a workers’ compensation payout and Social Security Disability Insurance (SSDI) benefits. However, you may not be able to receive the maximum amount of both benefits. Taking a lump sum settlement from a workers’ comp claim may impact your SSDI benefits. 

If you’re wondering, “How does a lump sum settlement affect Social Security Disability Insurance?” continue reading. Then contact our New York social security disability attorney for assistance. 

What Are Social Security Disability Insurance Benefits?

If your injury prevents you from working, you may qualify for Social Security Disability Insurance (SSDI) benefits. These benefits are available to disabled workers who worked long enough and recently enough and who have a physical or mental condition that prevents them from being gainfully employed. To qualify, your disability must last for at least 12 months or potentially result in death. 

Social Security Disability Insurance benefits can help you offset lost income due to your injury. In December 2022, approximately 7,604 disabled workers received Social Security Disability benefits in the U.S. The average monthly benefit was $1,483.10. 

What Is Workers’ Compensation?

Personal injury cases commonly happen at work. If your injury happened at work or while performing an activity within the scope of your job duties, you may also qualify for workers’ compensation benefits.

These benefits come from your employer’s insurance company. They can provide funds to make up for lost wages during your recovery, cover your medical bills, and pay for other resulting expenses. 

Workers’ compensation programs have paid over $492 million to injured workers in New York. 

Lump Sum Workers’ Compensation Settlement

Workers’ compensation insurance companies sometimes pay benefits as lump sums. Instead of receiving a monthly or yearly payment, you may get the entire payment upfront. 

Alternatively, you may receive a lump sum payment if you decide to settle your claim. In this case, you may sacrifice a monthly workers’ compensation payment in exchange for an upfront lump sum settlement. 

How Does a Lump Sum Workers’ Compensation Settlement Impact Social Security Disability Benefits? 

So, how does a lump sum settlement affect Social Security Disability Insurance? In short, you may not be able to receive the full amounts of both benefits at the same time. 

The Social Security Administration (“SSA”) will examine your workers’ compensation benefits to determine whether they came from a public settlement and how much money you’re already receiving to cover lost wages. Then, it could reduce your SSDI benefits to ensure that you receive no more than 80% of your average wages from public sources. The SSA will consider your earnings record based on the information that’s on file for you. 

But workers’ compensation doesn’t only cover lost wages. It can also pay for your medical bills while you’re recovering. 

The SSA won’t necessarily decrease your benefits by your entire lump sum settlement. Depending on your earnings record your SSD benefits may not be decreased at all. Instead, it may divide your lump sum settlement by the number of years until you reach retirement age — i.e., the amount of time you would have received a monthly workers’ compensation check if you hadn’t accepted the lump sum. 

The SSA would then decrease your monthly SSDI payment by that monthly workers’ compensation calculation.

For example, consider the following scenario:

  • You get injured at work at age 40 and can no longer be gainfully employed. 
  • Your job paid $100,000. 
  • You receive Social Security Disability Insurance benefits for 80% of your average wages, totaling $80,000 per year. 
  • You qualify for workers’ compensation benefits to cover lost wages and medical bills. 
  • Your total workers’ compensation lump sum settlement is $100,000. 
  • You have 30 years until you reach retirement age. Dividing your lump sum settlement across 30 years would equal about $412 per month. 
  • The SSA may decrease your monthly SSD payment by $412. 

How Your Attorney Can Help You Maximize Compensation

While you may not be able to receive the maximum amount of SSDI and workers’ compensation benefits, your Social Security Disability lawyers in NYC can help you develop a strategy to increase your income from both benefits. 

For example, your attorney could help you create a workers’ compensation settlement agreement that excludes medical expenses from the lump sum. Instead, you could still receive those monthly payments on top of your SSDI benefits

Alternatively, your attorney could create an amortization provision requiring the lump sum to be divided across the rest of your life instead of given at one time. 

Neither of these solutions is foolproof. You must work with a reliable attorney who can understand the legal language in your workers’ compensation settlement agreement and take the best approach for your specific situation. 

Seek Assistance from Social Security Disability Lawyers in New York

Social Security Disability Lawyers in New York

If you’re navigating SSDI benefits and workers’ compensation in New York, you need a legal team skilled in both areas. At Pyrros & Serres LLP, we’ve helped numerous clients throughout New York navigate workers’ comp, SSD, and personal injury cases. We’d be happy to help you understand “How does a lump sum settlement affect Social Security Disability Insurance?” and put our legal experience to work to increase your payout. 

Whether you need help with denial of disability claims or a related matter, call our attorneys today at 718-626-7730 (or text us at 347-797-1775) to request a free case evaluation. 

Frequently Asked Questions

Can Social Security Disability see your bank account?

If you receive Social Security Disability Insurance (SSDI) payments, the Social Security Administration shouldn’t need to see your bank account. There is no asset limit for you to be eligible for SSDI benefits. 

Do you have to report a lawsuit settlement to Social Security?

You typically do not need to report a personal injury lawsuit settlement if you receive Social Security Disability Insurance (SSDI) benefits. These benefits are not needs-based, and a personal injury settlement should not affect your eligibility. However, if you received a workers’ compensation settlement from public sources, you should report this to the SSA. 

How much money can you have in the bank with Social Security disability?

The SSA does not have a specific limit for the amount of money you can have in the bank while receiving disability benefits. SSDI benefits are not needs-based, and your assets will not affect your eligibility. 

About The Author

Michael Serres, ESQ.

Michael Serres, ESQ.

Michael Serres, ESQ. is a reputed Workers’ Compensation Lawyer in Astoria, Queens, NY. He graduated from St. John’s University School of Law in 1989. Mr. Serres was admitted to practice law in New York State in 1990 and is admitted in the Federal District Courts for the Southern and the Eastern Districts of New York. He has served on the Board of Directors of the Workers’ Compensation Bar Association and is currently serving on the Board of Directors of the Queens County Bar Association.

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