The Social Security Workers Comp Effect
Yesterday, I started to cover the Social Security Workers Comp Effect. I decided to break the article into two for readability.
If an injured worker remains out of work for a long period, the W-2 will be heavily affected, which in turn can quietly affect the W-2. Let us cover how this possible long-term effect can change your W2 Workers Comp benefits that almost never show up on a W2.
If an injured employee remains out of work for an extended period, then their W-2 wages will be much lower. However, unless the employer institutes wage continuation, which I do not recommend, what happens to the Medicare and, especially, the Social Security payments?
I know of no state that requires employers or the insurance carriers to pay or file that FICA has been paid as a replacement for the regular wages. As I mentioned in the previous article, workers comp benefits are not taxable
No workers comp benefits are taxed, but Social Security and Medicare (FICA) are not paid into which reduce the amount of Social Security received by the SSA.
Long Term Planning
The Social Security Admin uses the highest 35 years of earnings to calculate your retirement benefits. The acronym is AIME (Average Indexed Monthly Earnings). I will not go into the AIME calculation.
Thirty-five years covers most of a worker’s years on-the-job during their lifetime. If the injured worker has a few long-earning years, the lack of paying into FICA could cause lower future benefits at retirement.
For example, if an injured worker’s accident occurred in July of one year and then returned in June of the following year, that is two years of reduced payments into the SSA.
To see how many years one has paid FICA, go here and create an account. With the account, you can pull your Earnings Statement, which I heavily recommend doing every year if you are an injured worker or not.
