Most LTD Policies Contain Offsetting Provisions
As an attorney helping clients with long-term disability (LTD) claims, I know that obtaining Social Security disability (SSD) benefits is very important for most of our clients for a number of reasons. However, most are often not aware of how receiving SSD benefits will impact on the amount of long-term disability benefits they receive under many LTD policies.
This is because most private long-term disability policies include a provision that is known as an "offsetting" clause. The offsetting clause usually states that if you are receiving certain benefits (like Social Security disability benefits), then any long-term disability benefits will be reduced (offset) by that amount.
The net result is that your total disability income will remain the same whether or not you are awarded Social Security benefits because any SSD income will be offset by an equal reduction in the amount the LTD policy will pay.
Why This Can Be Good
If you are awarded SSD benefits, the only difference is your income will now come from two sources, Social Security and your long-term disability policy. This can be a good thing because your income stream is now diversified and coming from two independent sources.
As a result, if your long-term disability insurance company later terminates benefits, that you will still have Social Security disability income to fall back on. In addition, most long-term disability policies will require you to apply for Social Security disability benefits. While being award SSD benefits does not guarantee an award of LTD benefits, it does indicate that you have qualified as disabled by at least one entity, even if the rules and definitions are different than your LTD policy.
What Should I Do With a Retroactive SSD Award?
Retroactive awards are lump sum benefit checks that are paid out by Social Security for amounts owed in past periods. These are back benefits that were owed to you for prior months and can be quite large. Clients are often very excited to get this check, but you should be very careful and not spend this money.
The reason is this money may not be "yours." If you were also receiving LTD benefits and your LTD policy has an offsetting provision, you will likely owe your long-term disability most, if not all, of the amount of the retroactive award.
Your LTD insurer may not alert you immediately about this, but they will eventually find out and bill you for any overpayments under the offsetting provision of your long-term disability policy. Your retroactive award will cover that amount that is billed by your long-term disability insurance company. However, if you've spent that money, this could be a big problem. Of course, this is where our Kansas City long-term disability attorney can be of help.
Call Our Kansas City Long Term Disability Attorney
Still have questions about why you were denied long term disability benefits after an approval for Social Security disability, or another issue involving LTD denials, terminations or appeals? Download a free copy of our book, Danger: Proceed at Your Own Risk, which is full of practical tips to win your appeal.
If you have a particular question about your ERISA long term disability claim, contact our Kansas City long-term disability attorney by calling of office at 816-203-0143 or by filling out a contact form below. We will review your denial letter for free and provide you with some personal guidance on next steps.