If a Social Security Disability applicant is approved for back payments from the Social Security Administration (SSA), the beneficiary may face what is called a windfall offset. A Social Security Disability windfall offset will only usually occur if the applicant is entitled to both SSDI (Social Security Disability Insurance) and SSI (Supplemental Security Income) back pay. The purpose of the windfall offset is to ensure that a Social Security Disability beneficiary does not receive more money from the SSA in the form of retroactive payments than they would have received if the benefit payments had been being paid on a monthly basis instead of in the form of retroactive back pay.
A Social Security Disability beneficiary’s windfall offset is calculated by factoring in the beneficiary’s retroactive SSI payments (including cost of living allowances). If the retroactive pay is more than you would have received on a monthly basis, your Social Security Disability Insurance benefits or your Supplemental Security Income payments (or both) will be reduced in order to bring them into proportionate levels.
It is also important to note that in most cases, the windfall offset implemented by the SSA does not affect a Social Security Disability beneficiary’s regular monthly disability payment. This offset is only applied to the back payment of retroactive pay that is due to the Social Security Disability beneficiary. This retroactive pay is provided in a lump sum payment for SSDI and in installment payments for SSI benefits.