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Workers' Compensation, Social Security Disability Insurance, the Offset & the Hartman Formula: What You Need to Know
By Steven Chapman and Gregg Chapman, Esq.

When your client is on Social Security Disability and is settling by way of a Compromise and Release, you need to calculate the offset and attach a “Hartman” formula. Your structured broker can help.

Social Security Disability Insurance (SSDI): This program requires that Disability benefits be reduced when the worker is also eligible for workers' compensation payments. The combined amount of work comp and SSDI benefits cannot exceed 80% of the worker's average current earnings.

The Offset - Calculating the Reduction: The intent of the offset provision is to ensure that the combined benefits from workers’ compensation and Social Security are not excessive. The monthly SSDI benefits, including benefits payable to family members, are added together with the workers’ compensation payment. If the total amount of these benefits exceeds 80 percent of the average current earnings, the excess amount is deducted from the Social Security benefit. This offset of SSDI benefits applies to disabled workers under the age of 65 and their families. Benefits for a worker's spouse or dependent children are offset before the offset is applied to the worker's benefit.

Example: The average current earnings were $4,000 a month. The injured individual, spouse and two children would be eligible to receive a total of $2,200 a month in SSDI benefits. However, the injured individual also receives $2,000 a month from workers’ compensation. Because the total amount of benefits received ($4,200) is more than 80 percent of the average current earnings ($3,200), the family’s SSDI benefits will be reduced by $1,000. The Social Security benefit will be reduced until the month when age 65 is reached or the month the other benefits stop, whichever comes first.

Settling the Workers’ Compensation Claim: A structured or lump sum settlement is also subject to the offset. The settlement funds are prorated to reflect the monthly rate that would have been paid had the structured or lump-sum payment not been made. Medical and legal expenses incurred by the worker in connection with workers' compensation may be excluded when computing the offset.

The Hartman Formula: The “Hartman” Formula (Sciarotta v. Bowen (1988) 837 F.2d 135) is the tool used in the C & R to characterize the settlement proceeds. The purpose of the Hartman Formula is so Social Security does not increase the offset and take anymore than what is already being taken out.

Contact your Structured Settlement Broker for assistance in preparing the Hartman Formula and to answer any questions.

Steven F. Chapman & Gregg Chapman, Esq
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com or greggchap@aol.com

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