440.15(1) Permanent Total Disability
An injured worker may simultaneously be eligible for monthly Social Security Disability benefits under 42 U.S.C. s. 423. If the combined benefits exceed 80% of the claimant’s workers’ compensation average weekly wage (AWW), section 440.15(9), Florida Statutes, allows the workers’ compensation carrier to reduce its payment until the combined amount gets down to 80%. (The state precedence is authorized by 42 U.S.C. § 424a(d).)
Not every state allows the insurance carrier to take an offset. In the absence of the carrier taking an offset, the federal government may take an offset. (The federal offset formula, contained at 42 U.S. Code Sec. 424a – Reduction of disability benefits, is somewhat different than Florida’s workers’ compensation formula.)
While the claimant is receiving periodic workers’ compensation indemnity payments and the carrier is taking the offset, it is unlikely the Social Security Administration (SSA), which administers SSD, is entitled to an offset. However, most Florida workers’ compensation cases resolve with a lump sum washout settlement resulting in the termination of periodic payments. Surprisingly, at this point, the SSA is eligible to begin taking offsets. (The SSA offset applies even when the WC claimant does not qualify for SSD until after a settlement. Additionally, where the SSA had the right but failed to take the offset, resulting in “overpayments,” the SSA may recover the overpayments.)
To arrive at its offset number, the SSA will look to the language and terms of the workers’ compensation settlement agreement. It will consider the various benefit categories to which the lump sum has been allocated and the proration period if any underpinning the payment. Typical benefit categories include indemnity (past and future), medical (past and future), and attorney’s fees. For the most part, only money allocated to indemnity benefits will be considered for SSD’s offset formula. (Here’s a link to an SSA page with a detailed discussion of the benefits that may considered for the offset.)
To keep the SSD offset at the lowest possible amount, clearly delineated allocations must be set forth in the settlement paperwork and the payments should be based on a proration calculated on the greatest number of weeks, typically, Claimant’s life expectancy. Standard language, which has come to be called “Hartman Language,” is commonly inserted in the paperwork to address the proration issue. Here is sample Hartman Language:
PRESENT WORTH AND POSSIBLE OFFSET FOR SOCIAL SECURITY DISABILITY BENEFITS: In reaching this agreement, the parties have considered the present value of all past, present and future payments of indemnity benefits, impairment benefits, medical benefits, and death benefits potentially payable to the Employee under the Florida Workers’ Compensation Law on account of the injury referenced herein. The Employer/Carrier’s right to offset workers’ compensation indemnity and medical benefits due under the Florida Workers’ Compensation Law against benefits payable on account of total disability under CHAPTER 42, UNITED STATES CODE including benefits payable under Medicare is also included in these calculations and has been considered by the parties in reaching this agreement. Of the $1,000,000.00 total settlement, $250,000.00 shall be paid as attorney’s fees and $100,000.00 shall be paid as costs. Of the remainder, $350,000.00 shall be paid as indemnity benefits. The injured Employee is 67 years old (DOB: 1/1/1955), and per the United States Life Tables (2010) his life expectancy is 16.27 years or 846.04 weeks. The lump sum payment for indemnity benefits, after deduction for a proportional amount of attorney’s fees and costs ($122,500.00) is $227,500.00. When that amount is prorated on a weekly basis over the Employee’s life expectancy, the lump sum is equal to payment of past, present and future indemnity benefits at a rate of $268.90 per week. This periodic repayment schedule results in a substantial loss to the Employee on a consistent basis. Taking that into consideration, the parties hereby agree that those weekly payments are the same as if the lump sum would have been paid to the Employee in the amount of $268.90 weekly.
(Here’s a handy link to a calculator that will crunch the numbers and provide the language: “Hartman Language Generator”. A note of caution is necessary. This area of law is subject to frequent disagreement. Naturally, the Social Security Administration is always looking to limit its burden. Hence, it is important to be in tune with current law and arguments.)
Any lawyer who fails to assure that both of these protections — i.e., proper allocation and Hartman Language — are properly addressed, runs the risk of costing his or her client a significant amount of money. In the example above, if the pool of money from which the SSA could perform its calculation was $750,000 instead of $227,500, the offset amount would be significantly higher. Likewise, if the proration is for a period of time less than life expectancy, the SSD offset will be higher. The SSA will typically convert the lump sum settlement into a theoretical stream of periodic workers’ compensation payments much less than life expectancy. See 42 U.S.C. § 424a(b) (authorizing the Secretary to make such a conversion).
The allocation and proration numbers should be based on legitimate, solid evidence. Honest dealing is the only way to operate in this and every other arena. Importantly, SSD ends at age 65, then converting into regular Social Security Retirement benefits. SS Retirement benefits are not offset.
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