This article discusses the offset provisions with Workers’ Compensation and Social Security Disability benefits in Montana, and the Social Security Administration (SSA)’s recent stance regarding offsets in disputed workers’ compensation settlements. Finally, the article provides some practice pointers to avoid and/or resolve offset disputes.
Seriously injured workers commonly qualify for both workers’ compensation and Social Security Disability (SSD) benefits. When a claimant receives concurrent disability benefits, the SSA or the workers’ compensation insurer is entitled to offset (reduce) their disability benefits.
Federal regulations prohibit the SSA from asserting an offset if the workers’ compensation law under which benefits are paid provides for the reduction of workers’ compensation benefits. Put differently, state law determines which party gets the offset with limited exceptions.
Montana is one of the few “reverse offset” states, which means the workers’ compensation insurer gets the offset on total disability benefits Montana law provides.
In cases in which it is determined that periodic disability benefits granted by the SSA are payable because of the injury, the weekly benefits payable under this section are reduced, but not below zero, by an amount equal, as nearly as practical, to one-half the SSD benefits, which is to be calculated from the date of the SSD entitlement.
Mont. Code Ann. §§ 39-71-701(5) & 702(4)
Under Montana law, the workers’ compensation insurer gets to reduce the benefits paid to the claimant by 50% of the worker’s initial SSD benefit amount. For example, if the claimant receives $2,000 per month in SSD, the workers’ compensation insurer is entitled to an offset, or reduction, of its benefits by $1,000.00 per month. Montana law also allows the insurer to recoup any resulting overpayment.
If the claimant is awarded social security benefits, the insurer may suspend biweekly compensation benefits for a period sufficient to recover any resulting overpayment of benefits.
Mont. Code Ann. § 39-71-701(7)
Whereas workers’ compensation benefits begin almost immediately after the injury, qualifying for SSD benefits is often a lengthy endeavor for numerous reasons. Further, the workers’ compensation insurer’s entitlement to an offset does not vest until SSD benefits are formally awarded. Therefore, claimants will usually receive workers’ compensation benefits for an extended period and be faced with a significant overpayment when they finally qualify for SSD benefits.
According to a 2022 study by the Government Accountability Office, the median wait time for a final decision on SSD claims was 839 days (or around two years and three months). Using the figures from the example above ($2,000 benefit/$1,000 offset), the claimant would face the $1,000 per month offset reduction and an overpayment of $27,000.
For these reasons, it is common for parties to settle the workers’ compensation claim before the SSA makes a final determination on the SSD claim. To account for the SSD offset in such a settlement, the parties will explicitly state in settlement documents that the settlement amount has been appropriately reduced by the expected SSD offset. For years, the SSA has accepted this approach without issue.
Recently, the SSA has taken a more aggressive position and is asserting an offset on disputed workers’ compensation settlements even when the settlement documents state the offset was taken by the workers’ compensation insurer. Further, the SSA asserts a dollar-for-dollar reduction (unlike the 50% taken by the insurer) and contends there is no limitation on how far back it can look to assert an offset. We are currently appealing this issue with SSA on several cases.
In March 2022, the SSA issued a Notice of Award for one of our clients who had received a disputed PTD settlement. The SSA applied an offset and “awarded” a monthly SSD benefit of $18.70. We submitted the settlement documents stating the insurer took the full offset, but the SSA insisted it was still entitled to take it. Therefore, we appealed the decision and are waiting for a decision on reconsideration.
In that case, an SSA District Manager disclosed that the key items the SSA looks for when determining if an offset is available is how the settlement is named and whether the parties agree the claimant is totally disabled. Applying these parameters, the manager based SSA’s offset entitlement on settlement language stating, “the parties disputed the claimant’s entitlement to future wageloss and medical benefits.”
In another case from December 2022, the SSA reduced our client’s monthly SSD benefits from $1,113.20 to $81.50 because of his previous workers’ compensation settlement. We filed a Request for Reconsideration, asserting the following rationale:
Montana is a reverse offset state. Section 39-71-702 Mont. Code Ann. provides that the workers’ compensation insurer is entitled to offset its disability benefits when the claimant receives total disability benefits from the workers’ compensation insurer and disability benefits from the SSA. According to 20 C.F.R. 404.408(b), the SSA does not reduce disability benefits if the workers’ compensation law under which benefits are paid provides for the reduction of workers’ comp. benefits. The insurer has already taken the full Social Security Disability offset allowed under Montana law. Consequently, the SSA should not take the workers’ compensation offset.
We were also able to show that the SSA was notified of the workers’ compensation settlement prior to awarding SSD benefits to our client. Without explanation, the SSA conceded the offset and continued paying SSD benefits at the full disability rate.
In another case, the SSA asserted an offset because the claimant received a workers’ compensation settlement seven years ago. We sought reconsideration based on the above argument. In its August 26, 2023, Order, the SSA conceded its offset was incorrect and offered the following cryptic rationale:
Upon reconsideration, the initial determination was incorrect. We determined that… This decision is hereby correct and proper and in accordance with the pertinent provision of the law regulation.
The lack of an explanation in both cases appears intentional. It also illuminates the mixed approach taken within the SSA, making further clarification necessary. Thankfully, we may get clarification soon, as fellow MTLA members Eric Rasmussen and Dean Blackaby are trying the issue in Missoula on September 16, 2023.
Obviously, this is an evolving issue, and our approaches will have to change with further developments. Until we receive further clarification on the issue, we offer the following practice pointers to help protect your clients and avoid unnecessary offset disputes:
- While not expressly confirmed, these authors believe the SSA is less likely to insist on an offset if the workers’ comp. settlement occurred prior to the award of SSD benefits, especially if the SSA is notified of the settlement. Therefore, practitioners should ensure that the SSA is promptly notified of workers’ compensation settlements. The initial SSD application asks if the claimant has filed for workers’ comp. benefits, but if the client settles after the initial SSD application, the claimant will likely not be prompted to provide the settlement documents until after the SSA determines the claimant is eligible for SSD benefits.
- Avoid titling the settlement a Disputed Permanent Total Disability Settlement. Emphasize the accepted nature of the claim and the insurer’s agreement that the claimant is “presently totally disabled.”
- Include the offset calculation in the settlement negotiations and make it clear that the offer is conditioned on the insurer agreeing that the claimant is presently totally disabled and that it took the full SSD offset as a material part of the settlement. The settlement amount can be less than full PTD value because of the SSD offset, administrative costs, future uncertainties, and actuarial concerns.
- Consider the approaches used in jurisdictions without a reverse offset. For example: For the purpose of calculating the Claimant’s future social security disability benefits, if any, the parties agree as follows: Claimant’s work injury is permanent. The lump sum of $37,692.00 represents all future indemnity payments for workers’ compensation arising out of the work injury on 01/08/2014. The Claimant is paying $7,538.40 in attorney fees. Therefore, the amount potentially subject to offset by the Social Security Administration is $30,153.60. The Claimant’s remaining life expectancy is 529.20 months. Therefore, even though the above amount is paid in a lump sum, the Claimant’s monthly workers’ compensation benefit, for the purpose of determining the offset by the Social Security Administration, is $56.98 per month for 529.20 months.
We welcome any ideas you have about this issue and urge you to share your experiences/thoughts, so we can all better protect our clients.