Conceptually, Workers Compensation benefits are intended to be partial replacement of income covering present and future lost earnings. Medical and indemnity payments are determined by worker's compensation statutes and may not always fit the employees needs. A structured settlement enables the benefits to be tailored to better suit the needs of the injured party.
In Worker's Compensation cases, the claimant, typically, is a laboring employee with a limited understanding of money management. Should a large sum of money be released to the claimant if there is a substantial risk that the funds will be dissipated in the short term, through reckless spending, mismanagement or unnecessary but emotionally satisfying purchases
If the settlement proposal is imaginative, the claimant is relieved of the responsibility of managing large sums of money, yet is provided funds for immediate use plus a regulated income allowing him/her to adjust his/her lifestyle with the confidence that there will be no interruption in the income stream.
A structured settlement pursuant to a qualified assignment may provide the Claimant with greater security because the annuity issuer and assignee may be financially stronger than the employer, insurer or funding pool that has making the claim payments.
There are many cases where a structured annuity, may create a more advantageous settlement package than the lump sum approach or the continuation of benefits under the Act. This is particularly true when the indemnity benefit is minimal and the majority of the cost is associated with future medical care. Often the medical costs are high during the recovery period, then stabilize and the claimant finds he/she cant survive financially on the income benefits provided.
Caution to be taken with respect to Social Security in conjunction with workers compensation settlements
In most cases, Social Security Benefits are available to a disabled worker. These benefits are typically limited to 80% of a claimants average current earnings. Worker's Compensation benefits provide an offset to Social Security.
In the case of a lump sum settlement, The Social Security benefits may be totally eliminated and will not be reinstated until the lump sum and the interest income related to it, fall below 80% of the workers average prior income. If a settlement is properly structured, the claimant may be in a position of receiving both worker's compensation payments and social security payments, thereby providing a higher monthly income over the long term than a lump sum.
After two years of continuous disability, a disabled worker may also be Medicare eligible. The combination of a structured settlement with Social Security Benefits and Medicare, or other private insurance, may provide a greater degree of lifetime security than that afforded by a lump sum settlement
It is recommended that each case with Social Security involvement be closely reviewed to determine the ramifications of the proposed settlement. The local Social Security Administration should be contacted to make sure there have been no changes in interpretation of the law with respect to such settlements.