The Interplay Between Social Security and Workers' Compensation Benefits
By Marla A. Joseph, Esquire
I. Social Security and Social Disability offsets
A. Social Security Old Age/Retirement Benefits
There are various offset calculations that may apply when a claimant is receiving both workers’ compensation and Social Security benefits. In order to determine the extent of any offset, as well as the benefit that will be considered primary, one must consider: a) the date of the claimant’s injury; b) the claimant’s age; c) the commencement date of the Social Security benefit; and c) the specific type of Social Security benefit that the claimant has received or may be eligible to receive throughout the course of his worker’s compensation claim.
Section 204(a), which applies to work injuries occurring after June 24, 1996, permits an employer to take an offset of 50% of a Claimant’s old age Social Security benefit (a.k.a. Social Security). Section 204(a) of the Act states, in relevant part:
Fifty per centum of the benefits commonly characterized as 'old age' benefits under the Social Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.) shall also be credited against the amount of the payments made under sections 108, 77 P.S. § 27.1 [relating to occupational diseases] and 306, [77 P.S. § 511 relating to the schedule of compensation for total disability] except for benefits payable under section 306(c), 77 P.S. § 513 [relating to the schedule of compensation for specific loss].
Provided, however, that the Social Security offset shall not apply if old age Social Security benefits were received prior to the compensable injury.
77 P.S. § 71(a), as cited in White vs. WCAB (City of Pittsburgh), 38 A.3d 103 (Pa. Cmwlth. (2011), Appeal denied by White v. Workers' Comp. Appeal Bd. (City of Pittsburgh), 2012 Pa. LEXIS 1419 (Pa., June 27, 2012).
In White vs. WCAB (City of Pittsburgh), supra, the claimant argued that on the basis of age, Section 204(a) violated the equal protection clause of the Pennsylvania Constitution, Article 1 Section 1, Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 71(a). The court explained:
Specifically, she contends it imposes an unequal burden on the indemnity benefits of a claimant solely on the basis of age because only old age Social Security benefits may be offset1. Further, she argues that the Section 204(a) offset distinguishes between claimants over the age of 62 or 65, depending on when the injured worker receives old age benefits, and claimants under the age of 62 or 65, who are not entitled to old age benefits. Finally, she contends that Kramer v. Workers' Compensation Appeal Board (Rite Aid Corp.), 584 Pa. 309, 883 A.2d 518 (2005) can be distinguished from the case at bar because the severance offset is determined differently than the old age offset, and Social Security income is not wage loss replacement.
White, supra, at 1033.
The White court held that the Legislature had a rationale purpose for enacting Section 204(a), as it served the legitimate interest of cost containment for employers and the concomitant competitive benefit such cost containment offers for Pennsylvania businesses. Furthermore, the court held that the old age offset provision was a rationale basis to meet this objective. The court stated:
In an unemployment compensation case with a similar issue, this Court recognized Social Security benefits as wage loss replacement income. Latella v. Unemployment Comp. Bd. of Review, 459 A.2d 464(Pa. Cmwlth. 1983). The Equal Protection Clause of the Fourteenth Amendment of the U.S. Constitution provides, in relevant part: "No State shall make or enforce any law which shall . . . deny to any person within its jurisdiction . . . [footnote omitted] . . . We find no reason why it should not also be recognized as such under the workers' compensation laws. Social Security old age benefits are not meant to be additional income to someone who is active in the workforce. It was developed as a social insurance program that would pay retired workers age 65 or older a continuing income after retirement. . . . In other words, Social Security benefits, in general, replace the wages of an employee who has retired. Hence, as in Kramer, where wage loss replacement income in the form of severance benefits was found to be rationally related to the legislative intent of the workers' compensation law, we hold that offsetting Social Security benefits by the percentage contributed by an employer is also rationally related to the purpose of the workers' compensation law. Therefore, we conclude that the "old age" offset provision under Section 204(a) of the Act does not violate Article I, Section 1 of the Pennsylvania Constitution on the basis of age.
Id. at 1036. (Footnotes omitted).
Since Section 204(a) has been upheld on constitutional grounds, it is important for the practitioner to ensure that all threshold elements have been satisfied. As noted above, Section 204(a) applies only to injuries occurring after June 24, 1996. Moreover, Section 204(a) only entitles an employer to a 50% offset if the Claimant began receiving Social Security Old Age benefits after her work injury. Id. Furthermore, the only Social Security benefit to which Section 204(a) applies is Social Security Old Age benefits. In White, supra, the court stated:
The Social Security Act [42 U.S.C. §§ 301-1397mm.) clearly distinguishes between old age benefits and widow's benefits. See 42 U.S.C. § 402(a), (e). Therefore, it follows that the offset allowed pursuant to Section 204(a) of the Act applies only to the portion of Social Security benefits available to a claimant under Section 402(a) of the Social Security Act, or old age benefits.
Id. at 1036.
While an employer may take a 50% offset when the aforementioned threshold criteria are satisfied, Claimant’s attorneys should review each client’s particular economic and legal situation because a Claimant has no legal obligation to collect Social Security old age benefits and there may be an economic benefit for a claimant who chooses to delay her receipt of Social Security old age benefits. For example, claimants who are born between 1943-1954 are eligible for full Social Security Retirement benefits at age 66. (See http://www.ssa.gov/pubs/ageincrease.htm for a detailed listing of the applicable Social Security retirement ages based on birth year.) If a claimant in this age category elects to take her Social Security Retirement benefits at age 62, not only will she receive about 30% less in monthly Social Security benefits (see http://www.ssa.gov/retire2/agereduction.htm for the effect of early retirement), but she will begin receiving a lower workers’ compensation check, that could ultimately result in a lower lump sum settlement.
Another important consideration is whether it may behoove a claimant to delay the receipt of Social Security Retirement benefits. It is important to emphasize that those who elect early Social Security Retirement benefits must opt in to receive early Retirement/Old Age benefits. By deferring receipt of old age benefits beyond full retirement age, not only may this maximize your worker’s compensation income, but for every year that one defers her receipt of Social Security Retirement benefits up to age 70, the Social Security Administration will increase your annual benefit.
Footnote 6 of White, supra, states: Claimant lists in her brief other types of Social Security benefits not required to be offset pursuant to Section 204(a) of the Act including: wife's insurance benefits, husband's insurance benefits, child's insurance benefits, widow/widower's insurance benefits, mother's/father's insurance benefits, parents' insurance benefits, and disability insurance benefits. Cl. Br. at 11.