If you have a workers’ compensation claim, you may negotiate a settlement. A settlement can be a lump sum payment or a structured settlement. You need to understand which option is better for your case.
Our experienced Greenville workers’ compensation lawyer at Bobby Jones Law explains the differences between a structured settlement and a lump-sum payment in South Carolina workers’ compensation.
Structured Settlement & Lump Sum South Carolina Workers’ Compensation Settlements
If you have a workers’ compensation claim, here’s what you should know.
- Many workers’ compensation claims result in a settlement, which is a negotiated resolution of the claim.
- A settlement results in a monetary payment to the injured worker.
- Because a settlement is voluntary and negotiated, you have some say over the terms of the settlement.
- One of the options that may be available for your settlement is choosing between a structured settlement and a lump sum payment.
- You don’t have to agree to a settlement; you can agree only if the terms are favorable to you.
- A lawyer can help you negotiate, explain your options, and prepare your settlement agreement.
There isn’t one right answer in terms of structured settlements vs. lump sum in a South Carolina workers’ compensation settlement. What’s best depends on the circumstances of the case and the worker’s preferences.
What Is a Structured Settlement in Workers’ Compensation?
A workers’ compensation structured settlement consists of multiple payments of the award on a set schedule. Rather than paying the entire settlement amount at once, a structured settlement makes payments on a set schedule. Payments may be for a fixed duration, but for significant injuries, payments may continue for a lifetime.
What Is a Lump Sum Workers’ Compensation Settlement?
A lump-sum workers’ compensation settlement is the payment of the entire workers’ compensation claim at once. The insurer makes a single payment to resolve the case fully. The claimant is free to manage the funds however they choose.
Example of structured settlement vs. lump sum in workers’ compensation
For example, a person has a workers’ compensation claim worth $100,000, present value.
- Lump sum: The person receives a $100,000 payment, and the case ends.
- Structured settlement: The person elects a structured settlement over 20 years, at 4% interest. The person receives monthly payments of $605.98 per month. The person is paid a total of $145,435.20 over 20 years.
Note: Monthly payments are common, but payments can be on the schedule you choose. Weekly, biweekly, and annual payments are also common.
Pros and Cons of a Structured Settlement in SC
Pros
- Security. Peace of mind to know that your funds are protected from mismanagement.
- Planning. Knowing exactly what you’ll receive each payment.
- Flexibility. Flexibility to customize your payment schedule.
- Medical care. Funds available for future medical care.
- Taxes. Funds are typically tax-free in South Carolina (IRC Section 104).
- Total award. The total payout amount exceeds that of a lump-sum award.
- Beneficiaries. Beneficiaries may continue to receive funds if the recipient dies.
Cons
- Inflexible. Structured settlements are hard to change or sell once in place.
- Restrictions. You don’t have the entire amount available for immediate needs.
- Interest rates. Interest rates may be lower than you could receive investing on your own.
- Lack of control. Others control your funds.
- Third party. Structured settlements are usually paid by a third party, which carries the risk of insolvency.
Note: Most structured settlements feature a fixed interest rate, typically between 2% and 5%. In rare cases, payments may be tied to an index such as the S&P 500. It’s important to clearly state the terms of the annuity in the settlement and understand what you’re agreeing to.
Note: The Structured Settlement Protection Act applies to structured settlements. While intended to protect recipients from predatory tactics, the law creates requirements for transfers of payment rights, including court approval. These requirements can make the sale of a structured settlement annuity take longer and seem burdensome.
How Do You Know Which Option Is Right for Your Situation?
Whether a structured settlement or a lump sum is right for you depends on several factors. The larger the total award, the more likely a structured settlement will be appropriate. A larger award usually means more serious injuries, along with future medical care and long-term income loss.
But the size of the award isn’t the only factor. Self-managing the funds is another factor. Whether medical compensation is included can be important, along with Medicare eligibility and personal preferences.
A lawyer can help you decide if a workers’ compensation structured settlement is right for you.
How Settlement Type Affects Your Medicare and Disability Benefits
A lump sum or structured settlement may affect your Medicare and disability benefits.
Medicare
A settlement may trigger Worker’s Compensation Medicare Set-Aside (WCMSA) requirements. A Medicare Set-Aside reserve funds for future medical care for Medicare-eligible claimants.
A Medicare Set-Aside fund may be required if you are a current beneficiary (age 65+ or receiving SSDI) and your settlement is $25,000 or more. In addition, a fund may be required if you expect to be eligible within 30 months and your settlement is $250,000 or more.
If a Set-Aside fund is required but not created, Medicare may deny your claims.
SSDI and SSI benefits
In general, receiving a workers’ comp settlement doesn’t make you ineligible for SSDI. But you’re limited to 80% of pre-injury wages. Even when the settlement is a lump sum, the Social Security Administration may impute a monthly income rate to calculate the SSDI payment amount.
A workers’ compensation settlement, either lump sum or structured, can make you ineligible for Supplemental Security Income (SSI), since SSI is asset-based.
Can You Negotiate Your Workers’ Compensation Settlement in South Carolina?
Yes, you can negotiate your workers’ compensation settlement in South Carolina. With so many things to consider—lump sum vs. structured, payment schedule, benefit eligibility, and more±negotiating your settlement to your best interests is important for making the most of your workers’ compensation claim.
Why Greenville Workers’ Compensation Victims Should Talk to a Lawyer Before Deciding
Once your settlement is final, it’s hard to undo. It’s important to understand the difference between structured settlements and lump sums as you negotiate.
A Greenville workers’ compensation lawyer can explain your options. They can negotiate, draft, and review your settlement.
Bobby Jones Law offers full-service legal representation for injured workers. Call or message us now.
