After Claimant sustained a work-related injury, he settled his Longshore and Harbor Workers’ Compensation Act claim for a $104,901.54 settlement, which an administrative law judge approved. Four months later, Claimant was awarded Social Security disability benefits. When the Social Security Administration (“SSA”) calculated Claimant’s monthly disability payments it did not account for Claimant’s receipt of workers’ compensation benefits. Accordingly, the SSA advised Claimant in 2008 that his monthly Social Security disability benefits would be reduced. It took the SSA three years to reduce Claimant’s benefits. When the reductions were made, Claimant lost a significant amount of income. His Social Security payments fell from $1,357.00 to $258.50, and then to zero. Part of the reduction was used to pay the overpayment caused by the delay in reducing benefits.
Soon thereafter, Claimant filed a Chapter 7 bankruptcy. The SSA was listed as an unsecured creditor for “overpayment of benefits.” The SSA discharged an overpayment debt of $43,531.00, and it began paying Claimant benefits totaling $310.00 per month. Claimant then filed an adversary complaint against the SSA alleging that the SSA wrongfully withheld a portion of his Social Security disability benefits, in violation of procedural bankruptcy rules. The SSA asked the Southern District of Illinois to dismiss the complaint and the court obliged.
The SSA is required to reduce or offset an individual’s disability benefits when that individual’s disability also entitles them to workers’ compensation benefits. The purpose for the reduction is to prevent the receipt of duplicative benefits resulting in greater than pre-injury earnings. If a claimant receives a lump sum workers’ compensation award, the SSA treats the award as if that individual were receiving a monthly award. Basically, the SSA takes the total amount of the lump sum award and approximates a rate at which the award would have been paid out over time on a monthly basis. To put it a different rate, the SSA prorates the settlement award over a period of the injured worker’s life.
Here, the SSA’s actions were entirely proper. The court rejected Claimant’s argument that the SSA was not entitled to prorate a workers’ compensation settlement when an injured worker files a bankruptcy petition. Moreover the SSA actually did discharged the $43,531.00 pre-petition debt. It was not even attempting to recover that sum. Accordingly, Claimant’s complaint was dismissed.
Zimmerman v. SSA, 2013 WL 3380170 (S.D. Ill. Jul. 8, 2013).