The Settlement Alliance

What are ‘Entitlement Benefits’—and Will a Settlement Recovery Impact Eligibility?

What are ‘Entitlement Benefits’—and Will a Settlement Recovery Impact Eligibility?

Dec 1, 2017


There is considerable misinformation about what the word “entitlement” means in the context of government benefits and how a settlement will impact those benefits. The following is a quick breakdown of which programs qualify as “entitlement benefits” and how they may or may not be impacted by a settlement.

First—what does the word “entitlement” actually mean?

The word “entitlement,” when used in the context of describing a specific set of government benefits, is often misunderstood as a derogatory term. In fact, the group of benefits referred to as “entitlement benefits” are those programs for which an individual has paid taxes. Economists and those in the political spectrum have long argued over the use of “entitlement” in this context, claiming that a more accurate depiction of these programs would be to call them “non-means tested benefits,” “earned benefits,” or “federal retirement benefits.”

Regardless of the terminology, if you are currently employed, take a look at your latest payroll statement and you’ll see the acronym “FICA,” which stands for “Federal Insurance Contributions Act.” For each pay period, federal law requires your employer to withhold FICA tax to pay for a Social Security tax and a Medicare tax. At a certain point, an individual who has paid into those programs will become eligible to receive the benefits. In other words, that individual is entitled to receive those benefits.

Which government benefit programs are considered entitlement benefits?

There a few main programs that are grouped under the category of entitlement benefits:

Social Security Disability Insurance (SSDI): Delivers Social Security benefits to the recipient based on two factors: 1) the number of years of employment during which the individual contributed to Social Security via FICA tax and 2) Social Security’s determination that the person is disabled.

Social Security Retirement Income: Provides Social Security retirement benefits for a United States tax­payer who was covered under Social Security and who received credits for their previous employment record.

Medicare: A federal health insurance program for people 65 years of age and older, some disabled people under the age of 65, and individuals who meet certain other criteria.

How will a settlement impact entitlement benefits?

The acceptance of personal injury or wrongful death settlement proceeds will not impact eligibility for entitlement benefits. However, there is a caveat when it comes to workers’ compensation indemnity settlements—workers may not be eligible to receive the full amount of SSDI benefits and their full workers’ compensation benefits simultaneously. Social Security will calculate a reduction of SSDI benefits (referred to as an “offset”) based on factors that may vary by state. A structured settlement annuity may help the claimant minimize the impact of a reduction in SSDI benefits.

Contact our government benefit experts today

The Settlement Alliance has extensive experience in handling settlements for claimants who receive both entitlement and needs-based benefits. Our knowledgeable team is available to answer your state-specific government benefit questions today. Contact us at 800-464-2500.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential