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How Does A Lump Sum Settlement Affect Social Security Disability?

When you qualify for Social Security disability benefits, working with an experienced disability advocate helps you know how to handle common situations that may affect your eligibility for Social Security Disability Insurance or Supplemental Security Income. A disability advocate at London Disability would know, for example, they could answer your question, “Will a personal injury lump sum settlement affect SSD?”

The simple answer to your question is that it depends on the program through which you receive monthly SSD benefits. Both programs, SSI and SSDI, pay benefits to someone who is disabled and are administered through the Social Security Administration. However, we need to look at the differences in the programs to learn why and how those differences influence how your settlement affects SSD.

Two Social Security disability programs

The Social Security Administration oversees the administration of two separate programs that pay monthly benefits to people with disabling medical conditions. SSI is a needs-based program paying monthly benefits to adults and children who are blind or disabled and in need of financial assistance to pay for food and shelter. The program also pays benefits to adults without disabilities who are at least 65 years of age with limited income and financial resources that do not exceed $2,000 for an individual and $3,000 for a married couple.

Qualifying for benefits through the SSDI program does not rely on a showing of financial need. Instead, you must be entitled to benefits by having worked long enough and paid Social Security taxes on your income to be “insured” and eligible for benefits. As with SSI, you also must have a medical condition that causes you to be disabled and unable to engage in substantial gainful activity to qualify to receive SSDI benefits.

Why would a lump sum settlement affect SSD?

A claim for damages against another party whose negligence caused you to be injured is the most common situation that may result in a lump sum settlement. If you receive benefits through SSDI, the settlement should not affect your eligibility under the program. The reason is that Social Security regulations do not limit the financial resources that someone may have available to them and be eligible for benefits through SSDI.

On the other hand, money that you get through a settlement could affect your eligibility for SSI benefits. The determining factor would be if a settlement increases the value of financial resources above the program maximums of $2,000 for an individual and $3,000 for a married couple.

Some people with a work history that qualifies them to receive benefits through SSDI may also qualify for SSI. If you are eligible for both SSI and SSDI benefits, talk to a disability advocate at London Disability to review how a lump sum settlement affects you.

As a general rule, your SSDI benefits would not be affected by receipt of a lump sum settlement, but it could affect the benefits you get through SSI. Your SSI advocate can review your resources and income to determine whether the additional resources of a settlement in a personal injury or other civil lawsuit puts your allowable resources above the SSI limits of $2,000 for individuals and $3,000 for married couples.

Reporting a lump sum settlement

Changes that may affect your SSI benefits, including receipt of a lump sum settlement, must be reported to Social Security. The report must be made within 10 days of the end of the month in which you received the settlement.

Penalties can be severe for failing to report a lump sum settlement. The Social Security Administration may take the following action against you for failing to timely report the receipt of funds payable to you as a lump sum settlement:

  • Force you to repay any overpayment that you received from SSI.
  • Impose a penalty by reducing SSI payments that you are entitled to receive by a minimum of $25 and up to as much as $100 for the month that you failed to report the additional resource.
  • If the SSA has evidence that you knowingly made a false or misleading statement to conceal receipt of a settlement, it may withhold benefits for six months for a first offense. Subsequent violations may result in benefits being withheld from you for up to 24 months.

Giving away the settlement funds to someone to prevent the settlement from affecting your SSI benefits does not prevent SSA from taking action to reduce your benefits and impose sanctions against you.

Get advice from a disability advocate

The fact that you receive SSI or SSDI benefits should not prevent you from pursuing claims for damages that you may have against other parties. However, discussing with a disability advocate at London Disability possible lawsuits and how a lump sum settlement affects SSD benefits may provide options to minimize the impact.

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