How Unemployment, Pension or Social Security Disability or Retirement May Affect Workers' Compensation Benefits

How Unemployment, Pension or Social Security Disability or Retirement May Affect Workers’ Compensation Benefits

If you are receiving workers’ compensation wage loss benefits, you may also be entitled to other benefits such as unemployment, pension benefits or Social Security retirement or disability benefits. However, it is important to know how receiving these benefits may affect your receipt of workers’ compensation. In general, while it is permissible for a person to receive workers’ compensation and pension benefits and/or Social Security retirement (not disability) benefits, you may not receive both benefits in full.

In 1996, Gov. Tom Ridge and the Pennsylvania Legislature enacted Act 57 which amended the Pennsylvania Workers’ Compensation Act to allow employers to reduce injured workers’ wage loss benefits if an injured worker also is receiving other benefits such as Social Security retirement benefits or pension benefits. There are many reasons an injured worker may consider taking pension or Social Security retirement benefits while they are receiving workers’ compensation. The prospect of losing health insurance benefits is the most common reason an injured worker is forced to consider taking pension or Social Security retirement benefits while they are receiving workers’ compensation benefits. While workers’ compensation provides wage loss benefits and payment of medical expenses for work-related injuries, it does not protect benefits an employee may be receiving through their employer, such as health insurance.

Before taking a pension, or signing up for Social Security retirement benefits, injured workers should be aware that collecting those additional benefits likely will affect the amount received from workers’ compensation. Collecting pension benefits paid by the same employer paying workers’ compensation or collecting Social Security retirement benefits does allow employers to reduce the amount being paid in workers’ compensation.

If an injured worker is receiving wage loss benefits and becomes entitled to receive Social Security retirement benefits, the employer or insurance company paying workers’ compensation is entitled to reduce their wage loss payments by 50 percent of the Social Security benefit the injured worker is now receiving. There is no reduction if the injured worker already was receiving Social Security retirement benefits before the work injury. Nevertheless, it is important for injured workers to understand that if they begin to receive Social Security retirement benefits while they are receiving workers’ compensation, their workers’ compensation benefits will be reduced.

Under Pennsylvania law, an employer can reduce wage loss benefits due under workers’ compensation if the injured worker begins to collect a pension from or through that same employer. An employer is entitled to reduce the workers’ compensation wage loss benefit by the monthly pension benefit that it funded. Pensions typically are created by funds contributed by both the worker and the employer. Under the Workers’ Compensation Act, the employer cannot take a credit for the amount of the pension that was funded by employee contributions, but it can take a credit or reduction based upon the amount of the pension benefit that it funded. In some cases, the employer-funded amount can exceed 85 percent.

For example:

Workers’ compensation benefits due each week = $500.00
Pension benefits paid each month = $460.82 each week
Percent of pension benefit funded by the employer = 75 percent
$460.82 x 75% = $345.62
Workers’ compensation benefits reduced to $154.38 each week

The law provides very strict guidelines for how an employer can calculate the percentage of pension benefits it funds. However, many employers do not correctly calculate the percentage of pension benefits. It is next to impossible for a worker to know whether the pension benefit offset taken by the employer is correct. As a result, many injured workers’ wage loss benefits have been reduced at the wrong rate.

For instance, it is common for employers to use the gross pension benefit received by an injured worker to calculate the offset. This practice is absolutely incorrect. The law specifically states that the employer is to do the calculation using the “net” benefit amount received – that is the amount received after taxes. Despite this very clear mandate, employers routinely use the gross figure and cheat injured workers out of benefits to which they are entitled.

If your workers’ compensation claim was denied and you received unemployment compensation while you were fighting for the right to workers’ compensation, your workers’ compensation benefits will be reduced by the net amount you received from unemployment. It is perfectly acceptable to receive unemployment while you are waiting to be approved for workers’ compensation, but it is not permissible to receive full benefits from both sources for the same time period. If you win your workers’ compensation benefits, your employer will be ordered to pay you workers’ compensation benefits and will be allowed to reduce those payments by the amount of net unemployment benefits received.

If you are receiving workers’ compensation benefits and are thinking about retiring, contact our Certified Workers’ Compensation Attorneys to discuss how retirement may affect your rights. If your workers’ compensation wage loss benefits have been reduced because you began to receive a pension, you may be entitled to retroactive benefits if your employer did not calculate your pension offset correctly.

Contact the Workers’ Compensation Department at Willig, Williams & Davidson to speak with a Certified Workers’ Compensation attorney about your case. Call us at 1-866-413-COMP (2667).