Social Security (SSD) and Long-Term Disability (LTD) Insurance

What is the difference between social security disability (SSD) and long-term disability (LTD)?  Social security disability is a government program that is paid in to with your work credits.  You know when you get a paycheck and see what has been taken out?  The part that says FICA is paying in to social security for either your retirement or if you become disabled and cannot work.  The amount you qualify for is based on your amount of earnings and hours worked.  ERISA long-term disability insurance is financed premiums and usually pays a percentage of your income.


Do I need to file for social security if I am receiving LTD?

Probably.  Most ERISA LTD policies require you to file for SSD if you have been out of work for a certain period of time that would qualify you to receive SSD in order to receive unreduced benefits. Let’s say your LTD policy pays 60% of $5,000 monthly earnings, or $3,000, but SSD will pay you $2,000 if you are approved for SSD.  Most ERISA LTD policies entitle the insurer to send you $1,000 per month (deducting the SSD offset) even if you aren’t receiving it – unless you send proof of applying for SSD and exhausting the administrative process (appealing a denial, attending an ALJ hearing) – in which case the insurer will pay the full LTD benefit if the insurer approves your LTD claim.


Why does the insurance company want me to get social security?

Most policies give the insurer credit for any other income you receive as an offset to any monies they would owe you.  This means that if a disability insurance company would normally owe you two thousand dollars per month for your disability benefits, but you receive one thousand dollars from social security, the insurance company would only owe you one thousand dollars.  The insurance company wants you to get approved because it means less money coming out of their pocket.  Many insurance companies will even hire third parties to assist you in getting your social security awarded for this reason. SSD isn’t the only Other Income offset.  Worker’s Compensation works the same way.  There are other potential Other Income offsets as well.  Veteran’s Benefits are rarely offset, but some policies even offset Veteran’s Benefits.


What happens if I get social security?

As mentioned above, the insurance company will offset what they owe you against what you’re receiving.  If you have been out of work for a while, social security may award you benefits and backpay from the date they found you to be disabled.  If you have been receiving long-term disability benefits, the insurance company will calculate that monthly difference and want to be reimbursed for the months they paid you full pay compared to what they would have been paying after the offset for those months. After you are awarded your social security, you may receive a reimbursement demand letter from the insurance company.  Sometimes an insurance company will even conduct a review of your file after you are awarded social security and decide they won’t pay you going forward.  This may sound counter-intuitive, but insurance companies will state their set of standards for determining disability are different than social security standards.  Even if you are not denied disability benefits immediately, it is possible that the insurance company could deny your benefits after you reimburse them for the social security offset.


So what should I do if I receive an overpayment letter from the insurance company?

Give our office a call so we can do an intake with you and review the letter from the insurance company.  We offer free consultations, so it wouldn’t hurt to let us review your situation.  If the insurance company denies you after receiving your notice of award, we can look at your case to see if we can help you appeal the denial. 813-839-2000