Most long-term disability (LTD) plans require claimants to apply for Social Security Disability Insurance (SSDI) to continue receiving benefits.  LTD benefits are typically paid as a percentage of a person’s pre-disability earnings to supplement SSDI income.  Accordingly, LTD policies are usually reduced by the Social Security Disability benefit rate.  If the Social Security applicant is approved for disability, the LTD insurance company is allowed to reduce (or “offset”) the monthly LTD benefit by the amount of Social Security disability payments received.  For example, when a person who receives $2,000 in long-term disability benefits per month is approved for $1,800 in Social Security disability, he can still collect a total of $2,000, but $1,800 will come from Social Security and the remaining $200 from the LTD insurance carrier.

 

Because Social Security Disability claims often take several months or years to be approved, over time substantial amounts of Social Security backpay can accumulate.  This creates an overpayment when Social Security pays the lump sum of backpay.  In most situations the entirety of  the Social Security backpay is due to the LTD insurance carrier, minus any fee due to the claimant’s representative.

 

An insurance carriers rules for paying LTD benefits can change based on the amount of time a claimant receives benefits.  In some cases the LTD provider will stop benefit payments while Social Security will continue to provide benefits to the claimant.  The LTD provider is not bound by the Social Security Administration’s decision, but cannot ignore the decision, either.

 

At Disability Benefit Partners our representatives are experienced in both LTD and SSDI claims and can help you navigate the complex interactions between the two benefits.  If you have been denied LTD benefits or had your benefits stopped contact our office at 515-271-8186.