Will a personal injury settlement affect the SSDI or SSI monthly benefits you currently receive? Should you apply for Social Security disability benefits and pursue a personal injury claim at the same time?
These are important questions, and for each form of Social Security benefit, the answer is different.
For example, you’ve been seriously injured in a car accident, or a slip and fall, or other trauma caused by another person’s negligence or reckless behavior. You filed a claim against the negligent party and you have just received compensation in the form of a personal injury settlement. But you’re also the recipient of Social Security disability benefits, either through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). Would the new PI settlement money affect your SSDI or SSI benefit amounts?
The short answer is:
- SSDI: No, a settlement in a personal injury case does not affect SSDI benefit payments.
- SSI: Yes, generally SSI benefits are negatively affected by a personal injury settlement.
Both the SSDI and SSI programs are managed by the Social Security Administration (SSA). The reason PI settlements affect the two SSA programs differently is that each program has very different eligibility requirements to fit different purposes. SSDI is an “earned benefit” program, while SSI is a “needs-based” program for people whose assets and income fall within a certain poverty range. This also means each benefit is paid from different federal coffers.
How Does a Personal Injury Settlement Affect SSDI Benefits?
A settlement in a personal injury case will have no impact on your SSDI benefit — you do not need to take any additional steps to continue receiving your full SSDI monthly payments solely because you obtained a PI settlement.
Social Security Disability Insurance (SSDI) is an earned benefit based on your work history.
The SSDI benefits program is financed through payroll taxes that you have paid into over the years. You know these taxes as the Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). Once you’ve worked long enough, you are entitled to SSDI because you have earned them.
Hence, if you are receiving SSDI benefits, a settlement in a personal injury case will in no way affect your SSDI. Disability benefits would continue until you return to work, or SSA finds you are no longer disabled, or you reach retirement age.Likewise, because Medicare benefits are based on work history, and not income or assets, your Medicare benefits should not change.
If you have sustained a personal injury, you may seek personal injury damages and also file for Social Security Disability Insurance (SSDI).
The following applies if you are not receiving SSDI benefits at the time of your personal injury.
You may quality for SSDI benefits after a personal injury event if you meet Social Security’s definition of “disability” as follows:
You must not be able to engage in any substantial gainful activity (SGA) because of a medically determinable physical or mental impairment(s) that is either:
- Expected to result in death.
- Has lasted or is expected to last for a continuous period of at least 12 months.
Learn more about how to prove to Social Security that you are disabled in our SSDI Infographic.
On the other hand – Existing SSDI benefits can limit the terms of a personal injury settlement.
If you were already receiving Social Security Disability payments when the personal injury occurred, this means you are not working. Therefore, any PI settlement would be less than if you were working. The settlement would not include compensation for lost wages and lost future earning capacity. This often results in a significantly lower personal injury settlement or award.
Also, the defending party in the personal injury case may make an unreasonably low settlement offer. They may justify this by arguing that since you are already claiming disability, your pre-existing disabling condition is at least partly responsible for the serious nature of your recent injuries.
For example, SSDI for COPD would not reasonably affect your settlement for back injuries suffered in a motorcycle wreck. However, the SSDI benefits you’re receiving for severe back problems very possibly could. You and your lawyer would need to demonstrate the differences between your ongoing disabling condition and the personal injury.
It is also common practice for insurance companies and attorneys for opposing parties in a personal injury case to delve into your personal history looking for anything that could reduce your PI settlement amount.
Our disability lawyers understand both sides of these issues and the laws that govern them. We have designed our practice specifically to empower and support disabled individuals and can analyze all legal options for your unique situation. Our representation ensures that your eligibility for benefits remains protected and maximum benefits are preserved throughout the life of your disability claim.
How Does a Personal Injury Settlement Affect SSI Benefits?
Unfortunately, a settlement amount in a personal injury case will reduce or terminate Supplemental Security Income (SSI) once you received the settlement payout.
Supplemental Security Income (SSI) is for those in special financial need and are disabled.
Supplemental Security Income is a “needs-based” welfare program and is therefore not tied to your work history. To get SSI, you must be disabled, blind, or at least 65 years old and pass an “asset test” proving you meet financial eligibility requirements. Your spouse’s income and assets can affect SSI eligibility as well.
SSI is funded from a different federal money source than SSDI. These funds are from general tax revenues, like personal income and corporate taxes.
With a personal injury settlement, suddenly the income you report for SSI eligibility purposes will be increased, in many cases significantly. If SSA finds that you earn too much “countable monthly income,” you will no longer qualify for SSI benefits.
How much is too much? The monthly maximum Federal amounts for 2021 are:
- $794 for an eligible person
- $1,191 for an eligible person with an eligible spouse, and
- $397 for an essential person. (An SSI “essential person” is someone who lives with an SSI beneficiary and provides essential care.)
You would no longer be eligible for SSI because there is no longer a financial hardship.
Likewise, because Medicaid benefits are based on financial need, your Medicaid benefits will also be at risk of reduction or loss. This can result in catastrophic loss of benefits for individuals who have no access to private health insurance or Medicare to cover costs of hospitalizations, medical treatment, and prescription drugs.
Is There a Way to Avoid Having My SSI Payments Reduced or Terminated?
Yes, legal solutions to avoid loss of SSI benefits do exist, such as taking steps to legally transfer the personal injury settlement funds into a special needs trust. This form of trust is designed to protect disabled individuals. A trustee is named to manage the content of the trust and pay expenses on your behalf.
Because you do not have direct control of your trust, the government (SSA) will not consider the personal injury settlement compensation as income affecting SSI eligibility. In other words, the money is no longer “countable” under Medicaid’s rules. Your SSI would be protected into the future, along with other protective benefits.
Note: Creating a special needs trust is a complicated process, with strict regulations regarding disbursements. It is essential to consult an experienced lawyer for assistance.
Do I Have to Report my PI Settlement to Social Security?
Yes. Because SSI (and Medicaid) benefits are determined based on income and assets, you will need to tell SSA how much your settlement was. Current SSA rules state that you should report a PI settlement within ten days of receiving it.
If you are receiving SSDI benefits:
- A personal injury settlement does not affect SSDI benefits;
- You do not need to report your SSDI settlement to the SSA.
- Existing SSDI benefits can limit the terms of a personal injury settlement.
If you are receiving SSI benefits:
- A personal injury settlement will cause the SSA to either reduce or terminate your SSI monthly benefits
- You must report any settlement amount from a personal injury case to the SSA.
- You may be able to protect your PI settlement via a special needs trust.
Points to Consider
- If your SSDI benefits are on the higher end, you may wonder whether or not it is “worth it” to file a personal injury claim. While a PI settlement is never guaranteed, a large settlement can mean a significantly higher payment value than SSDI. This is because (depending on the merits of the case) settlement negotiations may include compensation for the damages and losses that SSDI cannot cover, such as:
- Lost wages and future earnings
- Medical expenses and future medical costs
- Nursing home care or skilled in-home care
- Pain and suffering
- Mental anguish
- Quality of life changes
- To many, Social Security benefits may seem like a safer route, with a more predictable outcome, and a steady stream of benefits. However, once you begin receiving SSDI or SSI, the Social Security Administration is required to perform continuing disability reviews. If SSA finds you no longer meet their definition of “disabled” your benefits will be terminated. Conversely, a substantial settlement reached in a personal injury case can protect you for the long term.
- You will need an experienced, dedicated attorney to help you understand what your personal injury case is worth, and what your SSDI or SSI case is worth, and how the two forms of compensation may interact. Have your attorney determine a monthly calculation for a potential PI settlement compared to the Social Security monthly benefit amount, and talk it through so you understand all that is at stake.
Work With Disability Attorneys Who Will Protect You in Every Instance
The expansive rules controlling the Social Security programs make it very hard to know just what to do when faced with new revenue or added income. In these cases, special care must be taken to ensure you are protected.
We can represent you with experience and integrity. Marc Whitehead and Associates is a disability law firm deeply rooted in Social Security law and the laws that govern personal injury lawsuits and settlements. Founding attorney Marc Whitehead is double board-certified in Social Security and Personal Injury.We hope you reach out to us for help in these matters. Our dedicated attorneys will take every action to protect your best interests now and into the future. Wherever you live, we can help.