Legislation Authorizing States To Reduce Workers' Compensation Benefits Should Be Revoked

HRD-80-31: Published: Mar 6, 1980. Publicly Released: Mar 17, 1980.

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The combined benefits available to workers under the Social Security Disability Insurance program and State workers' compensation programs can amount to more than some workers were earning before becoming disabled. In 1965, Congress added the workers' offset provision to the Social Security Act in order to limit the combined payments to 80 percent of a disabled worker's wages at the time of injury and to provide disabled workers with a financial incentive to return to work. Either the Social Security Administration (SSA) or a State can offset its benefits under the provision, but not both. If a State offsets its workers' compensation benefits, SSA cannot offset its disability insurance benefits. Eleven States have exercised this option and are offsetting benefits.

Allowing States to reduce workers' compensation payments can cause the financial responsibility for work-related injuries to be shifted from employers to the Social Security taxpayers and reduce the money that SSA saves annually by offsetting disability benefits. SSA expects these savings to exceed $160 million by 1981 if no additional States offset benefits. The offsetting provision has been the cause of some inequities in benefits to disabled workers. Because States are not required to follow the 80-percent limit in offsetting workers' compensation benefits, workers in States which take advantage of the provision may receive more in combined benefits than they would have received if SSA had made the offset. Also, since SSA begins offsetting disability insurance payments in the month after it is notified that a disabled worker is receiving workers' compensation rather than when he begins receiving the compensation, workers who do not report workers' compensation benefits to SSA or who report them late are financially rewarded. Thus, this procedure allows some recipients to receive excessive combined benefits, reduces the monies Social Security could save by offsetting, and contradicts the intent of the offset provision.

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