People seeking Social Security Disability benefits often want to know how much they will receive if their claims are approved. Many people may think calculating a benefit amount should be simple. However, any Chicago injury lawyer can explain that predicting an exact benefit payment is often difficult. The Social Security Administration uses a complex formula to calculate benefits, and many factors besides employment income may affect an applicant’s final benefit amount.
Benefit determination process
SSD benefits are awarded based on a person’s earnings record, rather than financial need or the severity of the person’s medical condition. The SSA only considers earnings that a person has paid Social Security taxes on. These are referred to as “covered earnings.”
When determining benefit amounts, the SSA uses a person’s total covered earnings to calculate the person’s average indexed monthly earnings (AIME). The SSA then uses this figure and a preset formula to calculate the person’s primary insurance amount. The weighted formula adds up set percentages of the amount of income that falls between three bend points. For example, in 2015, the SSA will use the following percentages for the following three bend points:
- 90 percent of AIME below $826
- 32 percent of AIME between $826 and $4,980
- 15 percent of AIME over $4,980
The total sum of these figures represents the primary insurance amount. Based on this formula, the maximum available SSD benefit in 2015 will be $2,633.
The benefit determination process is slightly different for people who qualify for benefits based on another person’s earnings record. Dependent benefits are awarded based only on the qualifying earnings record; the dependent person’s own earnings are not factored in. Dependent benefits are capped at a certain amount of the benefit the qualifying person with the disability receives. For example, a beneficiary’s child or spouse may receive up to 50 percent of the total benefit amount.
Benefit amount adjustments
The primary insurance amount is not always equivalent to the amount the beneficiary receives. A few factors may increase or reduce a person’s final benefit payment.
People who receive certain other disability payments may receive lower SSD benefits. A person cannot collect government-regulated disability benefits worth more than 80 percent of his or her former average income. Therefore, people who receive workers’ compensation or state-issued disability payments may have their SSD benefits reduced. However, SSD beneficiaries may collect VA benefits or Supplemental Security Income disability benefits without any impact on their SSD benefits.
A person’s SSD benefit may also be affected if the person performed work for which he or she did not pay Social Security taxes. If the person receives a pension based on non-covered earnings, the SSA uses a different formula to calculate the person’s benefits. This results in a lower benefit amount.
Past due benefits
Some SSD applicants may be entitled to backpay or retroactive benefits, depending on the disability onset date, application date and claim processing speed. The SSA requires a five-month wait between disability onset and benefit entitlement. If an applicant waited over five months for a claim decision, the person may receive backpay for the extra months when he or she did not receive benefits. If a person’s disabling condition began before the application date, the person may collect up to 12 months of retroactive benefits.
These benefits are always paid as lump sums, so they do not impact monthly SSD payment amounts. Still, a Chicago injury lawyer would say that people should factor these benefits in when calculating what they may receive.
People who are applying for SSD benefits may calculate their own AIME and use the figure to estimate a benefit amount. However, the SSA offers several resources to help applicants avoid computational errors. These resources generally calculate the basic primary insurance amount without accounting for other factors, such as backpay or other disability benefits.
Every year, the SSA prints a statement that shows a person’s covered earnings history, along with the benefit amount the person would receive if he or she became disabled the same year. These statements are mailed out every five years to people who are under the age of 60 and don’t currently collect SSD benefits. People who are over the age of 60 receive the statements annually. The statements can be accessed online through the SSA’s website.
People who have kept track of their earnings records can also visit the SSA’s website to use online calculator tools. The SSA offers a quick calculator and more detailed calculators, which allow applicants to enter current earnings information and receive updated estimates. One calculator even lets people with pensions from non-covered earnings estimate how those pensions will affect their benefits.
Finally, applicants can also contact a local Social Security office for help estimating their SSD benefits. A representative can provide assistance in calculating the benefit amount. However, applicants should still view this figure as an estimate, rather than a binding statement.
All of these benefit estimates are only as accurate as the information provided. Some estimating tools make assumptions that may be incorrect. For instance, the online calculators presume each applicant has earned enough work credits to qualify for benefits, which may not be true.
The final benefit amount could also vary from the estimated amount if the SSA or the applicant has made an error in recording earnings. Similarly, if the applicant’s earnings have recently changed significantly, the final award could be more or less than expected. As a Chicago injury lawyer knows, applying for benefits is typically the only way applicants can learn definitively what they are entitled to.