Would a settlement with workers' compensation take away my disability insurance?

by Ibolya Balog, CPA | Aug 28, 2017
askacpaicon

I was injured in an auto accident at work, resulting in full disability and termination from my employment (a municipality). I was awarded full Social Security Disability. My mother passed away during that time, and her home had been put in my name for security. Both of my siblings are married. The home is being sold. I have checked with the Public Employees’ Retirement Fund, and can retire with no penalty. Also, I’m looking at a settlement with workers’ compensation and possibly from the at-fault driver. My attorney tells me these things will take away my disability. Is this true?

There are laws and regulations to prevent individuals from “double dipping,” meaning that one kind of benefit may be used to offset another benefit or to reimburse payments received from one entity from proceeds of another. There are offset arrangements between Social Security Disability and workers’ compensation, where receiving benefit payments from workers’ compensation may deemed to have been paid by Social Security Disability Insurance.
 
You do not mention who paid for medical costs. If workers’ compensation insurance paid medical benefits, then receiving a settlement from the at-fault driver will go to reimburse the medical cost first, not to you. If any settlement received is deemed to be earned income, then it will result in the reduction or elimination of the Social Security disability payments. The proceeds of the sale of the inherited real estate should not have any effect on the disability payments.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Ibolya Balog, CPA, is an associate professor at Cedar Crest College in Allentown, Pa.
Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search