Simultaneous disability benefits and workers' compensation: A confusing mishmash
Clients are often faced with the prospect of collecting both workers’ compensation and certain disability benefits at the same time. This is not necessarily a bad problem to have if you are injured and out of work. It is a good thing when injured to qualify for different types of benefits because it provides you options.
What is problematic, however, is the notion that you generally cannot collect both disability benefits and workers’ compensation benefits at the same time. Or, more accurately stated, it is possible that you can collect both types of benefits at the same time, but you generally will not collect both benefits for the same period of wage loss.
Confusing? It is. Sort of.
First, it is easier if we clarify what we mean when we distinguish between “workers’ compensation” and “disability” benefits. The two categories of benefits are both designed to replace lost income due to injury. So what’s the difference? The difference effectively boils down to how you became injured and who is paying the benefits.
Minnesota employers are generally required by law to carry workers’ compensation insurance. If you get hurt at work and suffer wage loss due to the injury, then the employer’s workers’ compensation insurance carrier pays out benefits to replace the lost wages. The key to workers’ compensation: Your injury must arise from your work.
Simple enough, except when you discover that workers’ compensation wage-loss benefits are confusingly titled “disability” benefits under the law: “temporary total disability,” “temporary partial disability,” “permanent total disability,” and something called “permanent partial disability” (which is not really a wage-loss benefit at all, but I will avoid bogging down in the details for the moment). To keep it simple, consider these benefits as simply “workers’ compensation” for the sake of this discussion.
The generic term “disability benefits” tends to refer to three distinct types of benefits: short-term disability (STD), long-term disability (LTD), and Social Security disability (SSDI). These, too, are designed to replace wages lost due to injury, but the difference between them and workers’ compensation is that, with these disability benefits, it does not matter how or where you got hurt. If you are hurt bad enough to suffer wage loss, you can collect disability benefits whether the injury arose from your work activities or not.
The other distinction lies in who pays the benefits. STD and LTD benefits are paid by insurance carriers from insurance policies provided by the employer. These are policies governed by contract, not state law, and they are not mandatory. So, many employees do not have access to STD or LTD benefits if the employer does not elect to provide such coverage. On the other hand, many employers do choose to provide STD and LTD plans for their employees as a fringe benefit. It is a matter of choice. The bottom line is that these benefits, like workers’ compensation, are paid by insurance carriers, but it is not required that your injury arose from work.
SSDI is the safety net. The Federal government has your back on this one. The Social Security Administration has its own qualification standards for you to receive this benefit, but the idea is the same: If you are hurt badly enough to suffer wage loss, you can collect SSDI benefits. Again, like STD and LTD, for SSDI the cause of the injury is irrelevant; all that matters is that the injury has knocked you out of work.
“Double-dipping” not allowed
Whether you are collecting STD, LTD, or SSDI, and you also qualify for workers’ compensation wage-loss benefits, the general rule of thumb is that you will not collect disability and “work comp” at the same time. Public policy disfavors double-recovery of benefits. There are several institutional mechanisms to discourage this kind of activity depending on which type of disability benefit is at issue.
STD, LTD and other contractual disability plans usually have “right of recovery” or “right of reimbursement” provisions embedded within them. These provisions usually state that, if the disabled worker collects workers’ compensation for the same period of wage loss that he or she has collected STD/LTD benefits, the STD/LTD carrier has the right to pursue recovery of the benefits it has already paid to the worker. How they do this varies. Oftentimes they simply offset future benefits against this “overpayment.” Sometime s the carrier demands the injured employee writes them a check for the “overpayment.” Some contractual plans do not require reimbursement for workers’ compensation, but they are rare. Consider yourself lucky if that is your situation. The rule of thumb is that you cannot double-dip on STD/LTD and work comp.
Social Security disability benefits are another issue. The Social Security Administration will pay disability benefits concurrent to workers’ compensation benefits – and this often happens – but it will offset your disability benefit amounts against your workers’ compensation benefits. The formulas and rules for how they do this are somewhat complicated, so it pays to give me a call to discuss such situations. Just know that you can collect both SSDI and workers’ compensation at the same time, but expect to see offsets taken from one or the other benefit if you do.