A mental or physical condition can affect your ability to engage in full-time employment. This can affect your finances, especially if you cannot engage in gainful employment for months or years. Fortunately, you can benefit from a long-term disability insurance plan. Insurance providers typically pay these benefits as a percentage of your earnings to help cover essential expenses until you can return to full-time work. You may also qualify for Social Security Disability Insurance (SSDI) if you can prove you cannot work full-time for at least 12 months due to your condition.
While these benefits can help you get by as you recover and prepare to return to full-time employment, you cannot collect both benefits in full simultaneously. Your long-term disability insurance plan could have a clause that allows the insurance company to recoup payments you receive from other insurance providers during the period it was paying benefits to you. If you receive an overpayment during that time, your long-term disability insurer may require repayment from your Social Security Disability backpay. Talk to a skilled Social Security disability attorney to understand your legal situation, rights, and possible outcome.
Long-Term Disability and Social Security Disability Insurance Benefits
Insurance benefits after a physical or mental ailment are critical because they give you the financial protection you need when you need it most. Some mental or physical conditions are severe and can cost a lot of money to treat or manage. With financial benefits, you can easily pay for your treatment, gain access to care, and ensure all your necessities are provided for when you cannot engage in gainful employment. Some benefits can help you care for your dependents before you resume employment.
Long-term disability benefits are an example of benefits you can receive as you receive treatment and recover from a physical or mental illness. These benefits are designed to replace part of your income when you cannot work as before due to a disability. You can receive long-term disability payments for several years or until retirement age, depending on your policy. An employer can provide private long-term disability insurance policies, or you can purchase them individually. When you cannot work, you can apply for benefits of 50% to 70% of your income.
Social security disability insurance is a federal program you can benefit from in case of a long-term physical or mental illness. It helps when you cannot engage in gainful employment because of an illness. You could be eligible for these benefits if you are unable to work as before due to a mental or physical condition that has lasted or is expected to last for a year or more. Your eligibility for these benefits is based on your contributions to Social Security.
You can collect these two types of benefits if you suffer an injury or have a physical or mental illness that makes it difficult for you to work for pay for at least one year. If you are eligible for long-term disability insurance benefits, you can apply for the benefits right after the illness or after realizing that you may not be able to engage in gainful work for at least 52 weeks. You can also apply for Social Security disability benefits if you have an individual or group long-term disability benefits policy.
Most insurance companies offering long-term disability benefits allow you to receive other long-term disability benefits and benefits from government programs, like SSDI, to reduce the amount you receive from them. Remember that most of these companies have an ‘offset’, or ‘other income’ clause in their contracts that allows them to recover the payment you receive from different insurance providers while you collect their full benefit. Since your long-term disability insurance provider can provide you with the benefits you need for the period of your disability, anything else you receive from other insurance providers, including Social Security, is considered an overpayment.
For example, if you are eligible for a monthly payment of $2,000 from a long-term disability benefit and are also eligible for $800 from Social Security disability benefits, you will not receive $2,800 in total during the period of your disability. Instead, your long-term disability benefits will be reduced by the amount you receive from Social Security. Thus, you will receive $1,200 from long-term disability benefits and $800 from Social Security. The amount your long-term disability insurer reduces from your benefits is an offset.
Because of this offset, you could mistakenly believe your insurance provider is garnishing your Social Security benefits, which is usually untrue. The truth is that your Social Security benefits remain intact, and your long-term disability benefits are reduced by the amount you receive from Social Security. The offset also seems unfair, considering your financial situation when you have a long-term disability. However, this keeps your monthly insurance premiums low, which is also something to consider.
Long-Term Disability Backpay
Although long-term disability insurers do not garnish your Social Security benefits, you could be required to pay the amount you receive from Social Security back to your long-term disability insurer. This is because it takes time for Social Security benefits to be approved. Only a few applications are approved immediately after application. Other beneficiaries must wait a year or longer to receive their disability benefits. Thus, you will receive a lump sum payment from Social Security once your benefits application is approved. The lump-sum payment covers when you meet the eligibility criteria for Social Security long-term disability benefits.
Remember that as long as you are receiving long-term disability benefits from a public or private insurer, you should receive less by the amount you receive from Social Security for the same disability. However, since Social Security takes a long time to process your application, your lump sum payment will likely come after receiving full payments from the long-term disability insurer. If you have an offset provision in your long-term disability insurance policy, your insurance provider is entitled to a back pay of most or all the money you receive from Social Security.
This is so because you have, technically, received an overpayment for your disability. The amount you receive from Social Security is the same as the amount you have received from your insurer. When this happens, your insurer will use Social Security’s Notice of Award to determine the overpayment. You are required to pay the overpayment to your insurance provider. However, you should countercheck the calculations to ensure the company got it right. This way, you will not lose some of your benefits to the back pay.
How Long-Term Insurers Recover These Overpayments
Once your insurance provider receives a notice that you have received payment from Social Security, it will request that you reimburse the overpayment immediately. This can happen right after you receive the lump sum payment, and the company has calculated the overpayment. In this case, the company will also have you sign a reimbursement agreement, in which you agree to repay any retroactive Social Security benefits within 30 days of receiving the money. Such an agreement is binding and can cause problems if you fail to adhere to its provisions.
Alternatively, your insurance provider can send you a Payment Option Form that offers you a choice to receive a reduced amount of long-term disability benefits for the period you will receive Social Security benefits. It can do this after learning that you have also applied for Social Security benefits after your mental or physical condition. This option works best when you have pending disability benefits to receive from Social Security. In this case, you will not have to pay anything back after receiving a lump sum payment, but will be expected to figure out how to cater to your needs before receiving Social Security benefits.
While the latter option seems favorable in some cases, it is difficult to know when you will receive Social Security long-term disability benefits. Remember that obtaining the money can take several months or years after filing your application. Although you will receive a lump sum amount once the payment is approved, you can struggle with bills and medical expenses before then. Thus, many people choose the first option: to make a back payment to their insurance provider after receiving Social Security benefits.
The Consequences of Not Making the Back Payment
You can lose your long-term disability benefits if you fail to pay the overpayment from Social Security benefits. Your long-term disability insurance provider can stop your monthly payments until you repay the overpayment. This could leave you without a reliable source of income, and for the time being, you cannot engage in gainful employment.
Additionally, you enter into a Social Security Reimbursement Agreement with your long-term disability provider when filing for benefits after an injury or illness. This agreement has a legal contract in which you agree to pay the overpayment from Social Security back to the company immediately after receiving it. The company can use this agreement to file a lawsuit against you for damages in a civil court. This is a legal problem you do not need, especially if you are already dealing with a long-term physical or mental condition.
However, a lawsuit is inevitable when you fail to uphold the end of your bargain in a legal agreement like that. Although these lawsuits are very rare, insurance companies will do what it takes to avoid getting into a loss. If the company wins in this lawsuit, you could lose more money than you could have lost by making the payment as required.
Attorney Fees and Dependent Benefits Can Also Affect LTD Offsets
You can include auxiliary benefits, like attorney fees and dependent benefits, when applying for Social Security benefits. These benefits help you cover some of the costs you cannot pay for since you are not working at that moment. However, you will not be able to receive these benefits since your long-term disability benefits insurer can also offset them from your payments.
Generally, your Social Security attorney's fee is usually covered by your Social Security benefits, not your long-term disability benefits. This means that your insurer will not include the amount in the offset. Your long-term disability legal fees are included in a different payment structure. Note that these legal fees are contingent, meaning you do not pay an attorney until you win the case. Some LTD insurers may provide assistance with your SSDI application, since approval reduces their financial obligation through offsets.
Take time to read your insurance policy, with the help of a disability benefits attorney, to ensure you understand your rights and the provisions. This way, you will know how auxiliary benefits, including benefits paid to your dependents and attorney fees, will affect the amount you should pay back to your insurance provider from your Social Security benefits.
Other Incomes that Long-Term Disability Companies Can Offset
Your insurance provider can offset other incomes you receive while receiving long-term disability benefits. You should know about these incomes to prepare for when that time comes, and also to defend your rights. The types of incomes your insurer has the right to offset include the following:
- Short-term disability benefits
- Third-party payments or settlements, for example, a personal injury compensation
- Workers’ compensation benefits
Here are the benefits that long-term disability insurance providers cannot offset:
- Your severance payments
- Stock options
- 401(k) retirement plan and other personal retirement benefits
- Profit-sharing payment plans
Find a Competent Social Security Disability Attorney Near Me
When you suffer a long-term physical or mental disability in California, you can benefit from disability benefits at least until you can return to gainful employment. If you have a long-term disability benefits policy, you can claim a monthly payment of up to 70% of your income to pay for your medical needs and other necessities for that period. Although you can receive Social Security disability benefits, your insurance provider should offset that amount because it is considered an overpayment.
At Leland Law, we understand how confusing this can be, especially if you need more money than you are receiving from your long-term disability insurance provider. We can review your contract to understand when and how much of your Social Security benefits your insurer should offset. Call us at 866-449-6476 to discuss your situation and our services at length.
