What are “Lump Sum Payments” or “Back Benefit Checks”?

You may have heard of people who have received a large “lump sum” payment from Social Security.  Lump sum payments, also known as back benefit checks, are actually payments issued by Social Security to cover the past due benefits owed to you.  Individuals receive these past due benefits because it takes such a long amount of time for claims to actually work through the Social Security system.

For instance, in Atlanta, GA, it can take anywhere from 2 to 3 years from the time an applicant applies for disability benefits until they are actually approved and receive a payment.  The reason why it takes this amount of time is because the Social Security Administration representatives are backlogged with thousands of people applying on a daily basis. Plus each claim has to be carefully evaluated.

An Example of a Past Due Benefit Calculation

Here is a good example of how a lump sum payment is calculated using facts from a case that I recently won. Tony was a steam mechanic at a local college for years.  On his days off, Tony and his son earned extra income installing gutters on houses.  In August of 2002, Tony was installing gutters on the second floor of a ranch style house.  Tony fell off his ladder 20 feet onto concrete.

Tony continued to work at the college for approximately 6 months before he his pain became unbearable, leading him to stop working in March of 2003.  Since his ladder accident, Tony has endured three back surgeries plus he’s being treated by a pain management physician. In April, 2003, Tony applied for disability benefits and used March 15, 2003 (the day he left his job due to the pain) as his “onset date.”

Tony’s hearing was held in December of 2006 (over three years later!).  He was approved for the benefits based on his onset date of March 15, 2003.  Because so much time had passed since his initial application, Tony was owed a lot of past due benefits by the SSA.  Here was Tony’s past due benefits payment schedule:

March 15- July 31, 2003 – no benefits paid – SSDI benefits are subject to a 5 month waiting period*

August 1, 2003 – December 31, 2003 – $1,500 per month x 5 months = $7,500.00.

January 1, 2004 – December 31, 2004 – $1,550 per month x 12 months = $18,600.

January 1, 2005 – December 31, 2005 – $1,575 per month x 12 months = $18,900.

January 1, 2006 – November 30, 2006 – $1,600 per month x 11 months = $17,600.

December 1, 2006 – on-going – SSDI payments adjusted yearly for inflation

Tony’s total past due benefits total was: $62,600.  My lawyer fee is 25% of past due benefits with a $5,300 limit, meaning no matter how much money we win in past due benefits, my fee cannot exceed $5,300.  Therefore, the amount that Tony received was $57,300.

Obviously, not all lump sum payments are the same.  The factors that come into play include the total amount of one’s monthly benefit AND the amount of months a person has to wait for an approval.

*The Five Month Waiting Period

Disability cases are subject to a five month waiting period, meaning that you will not receive payment for the first five months of your disability.  Click on the link to learn more about the five month waiting period and how it works.