You receive approval for your long-term disability benefits, and you think there is nothing else to worry about. However, the insurance company is still looking for ways to pay you a lower amount, which is where offsets come in. if you receive resources from another source, the insurance company can lower your monthly LTD payments.
Insurers commonly use offsets like worker’s compensation, social security benefits, state disability programs, third-party payments, and disability retirement benefits.
After an injury or illness, you have the right to apply for and receive payments from various sources. It is unlikely that there is one source that will cover all of your needs. Instead, work with a local long-term disability lawyer who can review your circumstances and determine which programs you qualify for and what is in your best interest. Don’t miss out on the benefits you deserve because you want to avoid an offset.
The definition of offset
While there are various offsets that insurance companies can use, they will outline them in their policies. You can find the definition and types of offset within the Summary Plan Description, which will outline the rest of your benefits. Most policies will use vague language like “other income benefits” to cover all bases, while some will be more specific. However, the insurer must explain the benefits they consider “other” and how they will offset them from your disability benefits.
Will an explanation of benefits include offset explanations?
ERISA has several rules and regulations regarding access to information for employees. You will typically receive an explanation of benefits that outlines these benefits without needing to have the master policy. Within the explanation of benefits, you will see what the plan includes, your rights, offset provisions, and percentages of benefits. If any of these details is missing, you must ask your employer, and they must provide it in writing.
ERISA and insurance offsets
While ERISA governs employer-sponsored long-term disability policies and the information provided to employees, it does not have any say in the kinds of offsets insurance companies can include. They do not govern the number of benefits the person can receive, and within that realm are offsets. However, ERISA is a federal program, and that means some states can put regulations on offsets.
There are many exceptions regarding offset provisions varying by state. Suppose you can receive Social security benefits; the state can say that the insurance company cannot offset your benefits until you receive benefits. If you are unsure how offsets work, speak to an ERISA disability offset attorney.
Laws do not prohibit offset
If you are screaming that these offset provisions are unfair, no law prohibits them. While there are exceptions, they don’t apply to every case. Essentially, these offsets prevent people from making more money on disability benefits than if they stayed working. So while you may assume that your disability benefits offer you a high percentage of your wages, it has been proven that insurance companies rarely pay out what they say they will in their plans because of offset provisions.
When you receive disability benefits through an employer, you have no way to change or negotiate offset provisions. The employer is the purchaser, and therefore they agree to the terms of your disability benefits plan. Conversely, you can attempt to negotiate offsets for individual plans, but most insurance companies do not budge. Familiarize yourself with the provisions and benefits of your long-term disability plan.
Insurance companies can take offsets
The article’s introduction mentioned quite a few offsets for your LTD claim. Most employees will also qualify for Social Security benefits. When you get approval and begin to receive benefits, your LTD will be offset by the amount you get from Social Security. Depending on the cause of your disability, you might also qualify for worker’s compensation, further complicating the claim process.
Additional offsets include retirement benefits or pension plan benefits. Disability pension plans can also offset your LTD benefits. If you have other individual or group policies that can provide payment for your ailment, it can also offset your LTD benefits. Insurers have varying rules regarding how much they will offset, but it will always be an amount that benefits them. Remember, they will calculate offsets by percentage and not a dollar amount.
What if you are still working?
The insurer can offset your benefits if you can work even part-time in a different field. Since you can work, your claim falls under residual disability or partial disability. As you imagine, disability benefits are available for employees who cannot work, and if you can work, then you do not need the complete set of benefits available.
The insurance company will look at the capacity you are working in and how much you make compared to what you used to earn. However, how they calculate the offset will vary. Review your policy and speak with an ERISA disability offset provision lawyer to avoid surprises.
Family benefits do not affect your offsets
In most cases, if your family is receiving benefits, it does not offset your benefits. If someone in your household is receiving disability benefits, that does not affect your claim, with one exception. If there is a family Social Security benefits award or dependent benefits, there is the potential for offsets.
Remember, this is not a rule; it will depend on the insurer, and the policies are often unclear about these provisions. Dependent social security benefits are contentious in these claims because there is vague language that can eliminate the offset.
Suppose the insurer uses vocabulary like “loss of time,” dependent benefits do not cover loss of time, so the insurer cannot use this offset. When it comes to family benefit offsets, it gets very complicated, and you need the help of an ERISA attorney to ensure you are protected.
Workers’ compensation offsets
The language in your policy is vital to whether the insurance can offset your workers’ compensation benefits. Of all the potential offsets, workers’ compensation is the most contentious because there are many exceptions and regulations regarding workers’ comp and LTD. The most significant gray area lies here because workers’ compensation benefits apply to employees who suffer an injury at work. They can obtain payment for medical treatment, wage replacement, and more.
Both workers’ compensation and LTD offer wage loss benefits, but there is a lot of debate about whether insurers can offset benefits that do not relate to wage loss. It will also depend on whether your condition is a temporary total disability or permanent. If you are permanent and stationary, the insurer cannot offset your benefits, but if you are temporary, they can. Since there are many intricacies in these, you need legal representation and guidance.
Personal injury offsets
If you are in an accident where another person causes you harm that results in your disability and you receive an award, you can get an offset. However, the complexities behind these offsets are lengthy, and it can be difficult to calculate these offsets. Third-party offsets are rare but possible if there is verbiage in the policy.
Often, the offset will be a reimbursement since a personal injury claim can last months or years. You will also likely have an attorney involved for a personal injury claim. While they can offer you guidance on that element, they may not have experience with long-term disability and ERISA disability provisions.
Can offsets increase?
A tumultuous situation is when the offset amount is more significant than the benefit amount because this further complicates the process. People who cannot work will receive benefits from different resources and can experience their offsets being higher than the benefits. When this happens, it will all come down to the language in your LTD benefit summary.
There is a monthly minimum available, but since it is not a legal requirement, many insurers do not include it in their policies. Additionally, the insurer can calculate the benefits by a minimum amount or a minimum percentage. Other policies will combine the two calculations, which will come down to your policy and the offsets you revive.
Some offsets will change amounts over time. Suppose you receive Social Security disability benefits; each year, they will adjust the award depending on inflation and other economic factors. If you see an increase in SSD benefits, the LTD insurer can increase your offset, depending on their policy and state. Some states do not allow insurers to offset Social Security benefits, and others do.
When you receive approval from the insurance company, they will also provide a letter explaining your benefit calculations. You must request one in writing if you do not receive a breakdown. If there is a miscalculation, you can also request a detailed calculation from the insurer. ERISA gives you the right to question the benefit award and request they reconsider their calculations and offsets.
Even after reconsidering, if there is still a discrepancy or you disagree, you have the right to file a federal ERISA lawsuit against the insurer. Do not attempt to take any of these actions without an ERISA lawyer. Most importantly, have a lawyer from the beginning because the appeals and reconsideration process does not allow new evidence and has other stipulations.
What often happens is a person will receive long-term disability benefits while they are waiting for a determination on Social Security benefits. The LTD insurer reserves the right to recover reimbursement for the award you get from SSDI payments. Suppose you have been receiving $1,000 a month through LTD, and then Social Security awards you a monthly payment of $600 for the same period you received benefits; the insurer can recover the overpayment they made.
The insurer has two options, they can require you to give them a lump sum to make up for the overpayment, or they can reduce your current payments until the overpayment is complete. The payment structure will depend on your insurance policy. So instead of receiving the $1,000 you did before, you will now receive $400, but only after you reimburse the insurance company.
Other provisions to look for
Aside from offset provisions, your long-term disability plan can have other provisions to be aware of that can affect your claim. While you should familiarize yourself with the entire policy, note time limits, disability definitions, partial disability, elimination periods, and mental and nervous limitations.
Since the insurance company can determine the verbiage for these provisions in the policy, they have control over what they pay you and their definition of disability. ERISA does apply to all policies, but they do not have full reign over the policy language, only some of the processes for filing and appealing for the benefits.
You need an ERISA disability offset lawyer
Regardless of your circumstances, you must have an ERISA disability offset lawyer guiding you through the claim process. Offset provisions can significantly impact the long-term disability payment you receive, and you need someone familiar with the laws and how other benefits will affect your LTD claim. While we cannot prevent offsets, we can help you prepare for the possibility and help you understand your options.
You have the right to apply for all benefits available to you for your injuries but must do so properly to ensure you get the maximum payment. You need a long-term disability lawyer from the beginning of your claim to ensure you are eligible for LTD benefits and other programs that can help you during this time. Some programs are temporary, while others are lifelong. Speak with a local long-term disability lawyer today.
Following graduation from Loyola Law School in New Orleans in 1990, Price McNamara served as a Federal Judicial Law Clerk to the Honorable John M Shaw, Chief Judge, United States District Court Western District of Louisiana.
Mr. McNamara founded J. Price McNamara ERISA Insurance Claim Attorney, and began putting his past experience to work for the injured and disabled clients he now represents against the insurance companies in personal injury and long term disability and other insurance disputes in both federal and state courts