The Social Security Disability Benefit Offset to Group Long Term Disability Insurance Benefits
Posted on Monday, February 7th, 2022 at 9:00 am
Most group long term disability (LTD) insurance policies permit the insurance company to reduce the disabled claimant’s LTD benefit by the amount that he or she and their spouse or children/dependents receive in Social Security disability (SSD) benefits from the Social Security Administration. Once an award of SSD benefits occurs, the disabled claimant should promptly advise the insurance company of the award and, if past-due SSD benefits were paid, resolve any reimbursement of past-due SSD benefits owed to the LTD insurer.
For example, Paul was receiving $5,000.00 from Hartford insurance company in LTD benefits. Paul’s Social Security disability claim was approved after he had been receiving LTD benefits for 12 months. His monthly SSD benefit is $2,500.00. He receives $30,000.00 in past-due SSD benefits ($2,500.00 times 12 months). Paul supplies a copy of the SSD Notice of award to Hartford. Paul will likely have to repay the $30,000.00 in past-due SSD benefits to Hartford, subject to any credit of a SSD attorney fee if applicable. Moving forward, Hartford would reduce Paul’s LTD benefit of $5,000.00 by his SSD benefit of $2,500.00. As a result, Hartford would begin paying Paul $2,500.00 and Paul would also receive $2,500.00 per month in SSD benefits from the Social Security Administration.
Please also note that if the insured individual qualifies for dependent or auxiliary Social Security disability benefits paid to a spouse or child, those sums are also typically a further offset or reduction per most LTD policies or plans. Those reimbursement obligations typically also apply to past-due and monthly dependent benefits. However, if considering the same example, once Paul’s dependent child reaches age 18 or graduates high school, the dependent SSD benefit will likely end and Paul’s LTD benefit should then increase if the SSD dependent benefit is no longer applicable.
While Abell and Capitan Law does not generally handle SSD overpayment disputes, we offer the above information to better inform our current clients and potential clients about how most group LTD policies function when it comes to the financial impact of receiving SSD benefits for the same time period that person receives LTD benefits. We believe it is best for the disabled claimant to submit any and all Notice of Award letters from SSA to the long term disability insurance company and to proactively resolve SSD reimbursement issues so as to avoid collections or possible other actions by the insurance company to recover funds. Our long-term disability claim management attorneys can guide you through these murky processes. Contact us at (267) 419-7888 to set up a consultation.