How a Social Security Disability Offset Can Cut LTD Insurance Benefits
Does Your LTD Policy contain a Social Security Disability Offset and Reimbursement Clause?
Today’s video brings shocking news to many group disability claimants: If you are awarded disability benefits by Social Security as a lump sum (in addition to your group LTD insurance benefits), your insurance carrier can ask that you turn over your SSDI lump sum award to them.
Most employer-sponsored long term disability plans are explicitly written so that the insurer benefits when SSA approves a claimant’s SSDI claim.
Group policies are drafted to (1) require that you file for SSDI benefits, and (2) if you win SSDI benefits, the insurer will offset the LTD benefit amount they pay you each month by the exact same amount you get from Social Security, including back-pay. These offsets also may include benefits paid for any dependents that qualify because of your disability.
The section of a group disability plan that defines Social Security disability offsets is typically labeled Deductible Sources of Income or Other Income Benefits.
Social Security Disability Offset and Reimbursement Agreements
The insurance company encourages claimants to apply for and win Social Security Disability. They want to you to have these benefits because then one of two things will happen in their favor:
- The monthly Social Security disability benefit award will offset (decrease) the monthly disability benefit payment that the insurance company has to pay you; or,
- If you elect a lump sum payout from Social Security, your group policy probably has a clause that says that you have to hand that money award over to disability insurance company.
If you are awarded long term disability benefits first, and later are awarded Social Security disability benefits, most group plans have provisions – reimbursement agreements – allowing the LTD insurance carrier to recover the overpayment.
For example: over the past year, your insurance company has been paying you total disability insurance benefits on a monthly basis. Finally, your SSDI claim is approved and you start receiving monthly SSDI benefits. Under ERISA law, this gives the LTD company the right to say they have been paying you too much in benefits. Now they may pursue reimbursement for the money they “overpaid” you.
In some cases, offsets can virtually wipe out the amount paid by the long term disability insurance company. An attorney at our firm can advise whether a reimbursement agreement should actually be agreed to at all, and if benefits and overpayments are calculated correctly.
Insurers use tactics for denying claims and reducing payments.
One such tactic is to team up with “representatives” to help walk their claimants through the Social Security disability maze—increasing the odds that each claimant wins their SSDI award.
To unsuspecting claimants, this option seems like a big help. The truth is the LTD company is trying to reduce its payment amounts. This is within the law. But be aware, these representatives are not attorneys. They are not bound by ethical obligations to you, and they have no state bar to hold them accountable. They are working for the insurer and whether they have your best interest in mind is debatable at best.
If Social Security ultimately approves your claim, you will owe the insurance company for the past-due LTD benefits the insurance company has paid you. From the moment the insurance company has denied your claim, it is important to seek experienced legal help.
Consult a dedicated disability lawyer who works for you.
Get help from your own disability attorney – not an LTD carrier’s rep. We handle many cases where the disability insurer has wrongly or intentionally delayed or denied claim approval for months until the Social Security disability case is decided. We can provide you with the experienced legal resources you need to prevail against an insurer’s delay tactics and other wrongful actions.
If you are unsure about where your case stands or if the Social Security disability offset you are paying is appropriate, give us a call today. We will review your claim for this and all other matters.