You may have received a letter from your long term disability insurance carrier demanding that you give them back some of what you were rightfully paid under the policy. These letters often come right after receiving an award for Social Security disability benefits.
Why do I have to pay back my long term disability company for benefits I rightfully received?
How can it be that you have to turn around and give back benefits that you were rightfully entitled to under your long term disability policy? This may feel very unfair and come after a long fight to have received your LTD benefits to begin with. To be clear, no one is saying that you were not entitled to the long term benefits to begin with, under the terms of your disability insurance policy. The demand for repayment has more to do with timing.
If you were covered by a long term disability insurance policy through your job and meet the terms of the policy, you may receive financial relief from the insurance carrier. Often, you will be paid 60% of the income that you earned before becoming unable to work. Paying out on the policies costs the insurance companies money. Even if it is money that you are rightfully entitled to, insurance companies often deny valid claims. They just hope that the people who are insured will give up and not fight back. This means that there is often a long and difficult appeal before many people ever see a dime. It can feel like a slap in the face to then be told that you need to give some or all of the money back.
There may be a few avenues of disability relief available, in addition to long term disability under ERISA.
To name a few:
- Social Security Disability Benefits
- Workers Compensation
- Veterans Affairs benefits
- Sick pay
Most people who are covered by a long term disability policy can also receive social security benefits. But to receive both would be amount to a double recovery and is not allowed. The problem is, social security benefits can take months or even a year to receive. This is especially true when an application for social security is denied, as are most claims, and must then endure the reconsideration or appeal process. Often, long term disability benefits are paid out sooner.
Understanding LTD and SSDI Offsets
Nearly all long term disability insurance policies contain a clause that essentially states that if you receive social security disability benefits covering the same time period that your disability insurance covered you for, you have to pay back the overlapping amount. This is called an “offset provision”. For example, let’s say that you receive a lump sum of $16,000.00 from your long term disability policy, covering you from last January to June. Then, social security comes around and awards you $10,000.00 for that same time period. You now have received $26,000.00 but cannot keep both. Under the terms of your policy, you have to take that $10,000 and give it to your disability carrier, essentially paying them back for the portion of social security that they advanced to you. If you had been denied social security, it becomes a non-issue and you’d be allowed to keep the whole $16,000.00. Under the offset, you are still getting $16,000.00 but $10,000.00 comes from social security and the insurance company ends up only paying $6,000.00. Please note that the amount you may have to pay back usually does not include the attorney fee you had to pay the disability lawyer.
Why Bother Applying for Social Security if I have to Repay my Long Term Disability Company?
You may wonder why even bother going through the hassle of fighting to get social security benefits if you are just going to have to give it to your insurance company. Why do the work for them? First of all, you should apply for whatever is available to you since nothing is guaranteed and you don’t know what you might get or when. Second of all, the terms of your long term disability policy likely require it. In the fine print of your policy, it probably says that you have to apply for social security. Your insurance company may even offer to match you up with someone to help you apply for your benefits. This representative might not even be a lawyer (but can charge the same as one) and I believe that it is best to hire your own lawyer to help with the social security, and certainly with the appeal of LTD benefits. The insurance company will require this because if you are awarded social security benefits, then the United States government just saved the insurance company money.
What Happens After I Receive a Letter asking for a Return of LTD Benefits, Following my Social Security Award?
Make sure that the offset has been correctly calculated. You have to pay it back. Ideally, if you still have the money from either SSDI or the LTD check you received for retroactive benefits, pay it back right away. Then you don’t have to worry about it. Naturally, once a benefit award is received, it is often immediately spent. By now, medical bills and living expenses have piled up. Most people have been put into a terrible financial situation as a result of the disability. As best as one can, arrangements must be made for repayment as soon as possible. Do not ignore the demand for repayment, tempting as it may be.
Moving forward, your LTD insurance carrier will reduce your LTD payment by the amount of your social security, including SSDI received for dependents.
Can Anything be done to remove the Offset Clause in my LTD Policy?
No. An offset clause in your disability policy is part of the contract that you have for the insurance. It is legally enforceable. There is no law prohibiting these clauses. The offset provisions allow insurance companies to essentially shift the burden back to the social security system.
Why Bother Applying for Long Term Disability if I have to Repay it back?
If someone has an long term disability insurance policy, benefits should still be applied for because a social security award is not guaranteed and may take a very long time to receive. Also, your LTD benefits may be more than you get from social security, allowing you to collect the overage. For example, if your insurance policy pays $2,000 per month and social security is $1600 per month, you will get $1600 from social security and the additional $400 per month from your long term carrier. In other words, the LTD can act as a supplement to what you get from social security.
I can no longer work, what now?
We may be able help, if you:
- You had to stop working due to disability
- Were covered under an ERISA long term disability policy
- Were denied LTD benefits and received a denial letter
- Your Doctors agree that your disability caused you to have to leave your job
There are very strict time limits to appeal your disability claim and it is definitely not something that you should try to handle on your own (to understand why, request your free book on this site). While our law firm does not handle social security cases, we can recommend a few very reputable attorneys to help you.