Impact of Long Term Disability on Social Security Disability benefits
Some employers provide Long-Term Disability (LTD) insurance to their employees. LTD insurance is a group insurance plan that also protects employees in the event that they become disabled. Typically, you or your employer (or both of you) will pay a monthly premium for LTD insurance, assuming your employer offers LTD.
Most LTD policies require employees to apply for SSDI benefits if they are receiving LTD benefits. That means that in the event that you do become disabled and begin receiving LTD benefits, you will likely need to apply for SSDI. Your employers LTD insurance carrier may offer you a representative to help you pursue your SSDI claim, however these representatives may not be attorneys, and keep in mind, they work for the LTD insurance carrier. So are they really looking out for your best interest? Just remember that you have the right to hire your own SSDI lawyer. Retaining an lawyer who works for you, and not the LTD insurance carrier, is normally the best route in order to protect your interest. Many times, the long term disability insurance carriers will deny your claim while your Social Security disability claim is pending. In this circumstance, a representative hired by the insurance carrier would not be interested in advising or assisting you. Even if they were an attorney hired by the insurance carrier, they would have a conflict of interest in trying to assist you with how you should fight the insurance carrier.
Offset and Reimbursement Provisions
The reason most LTD insurance policies require beneficiaries to apply for SSDI is because of the offset provision that’s normally found in the contract. Typically, if youre receiving LTD benefits and end up being awarded SSDI benefits, your LTD benefit amount will be reduced by the amount of your SSDI benefit. For example, let’s say you are currently receiving $1,000 per month from your LTD carrier, and are later awarded $500 per month in SSDI benefits, your LTD benefit monthly benefit payment would be offset and you would only receive $500 per month from LTD.
Additionally, since SSDI claims take a long time to get approved, way longer than LTD benefits, your LTD insurance company will likely be paying the entire benefit amount for quite a while. You may even be requested to sign a reimbursement agreement, in which you agree to reimburse the insurance carrier for the amount of retroactive benefits, aka back pay, issued to you by the Social Security Administration(SSA). This means that when the SSA finally approves your SSDI claim, you will likely have to pay back your LTD insurance carrier the amount of past-due benefits that you are paid. The SSDI past-due benefits is usually the amount beginning from the date you were found to be disabled to the date you begin receiving SSDI benefits. Another option is that the LTD insurance company may reduce your monthly payment until the back-pay amount is satisfied.