Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are federal programs designed to ensure that disabled Americans have access to the income they need to support themselves and their families. According to data from the Social Security Administration (SSA), approximately 10 million people receive some form of federal disability benefits each year.
Many people are also covered by private disability insurance—either purchased on the individual market or obtained through an employer. Many of these policies include some form of “offset” language. In this article, you will find a guide to the most important things to know about Social Security disability benefits if you received LTD benefits and how offsets come into the equation.
Many LTD Policies Require Applicants to File an SSDI Claim
In the United States, the vast majority of people who have long term disability insurance (LTD coverage) obtained their insurance through an employer-backed group policy. These insurance policies fall under a federal law called the Employee Retirement Income Security Act of 1974 (ERISA). In most cases, LTD insurance policies include language that requires applicants to file a Social Security Disability Insurance (SSDI) claim when they seek long term disability coverage.
LTD Policies Can Generally Take an “Offset” of Your SSDI Benefits
The standards used by the Social Security Disability Insurance (SSDI) and ERISA-regulated long term disability policies are not always identical. Quite the contrary, it is possible that your long term disability claim may be approved even if your Social Security disability claim is denied. However, in many cases, applicants who are approved for LTD benefits will eventually have their SSDI claim approved as well.
Once an SSDI claim is approved, the private insurance company is likely to seek an offset of your benefits. In other words, they are going to seek to recoup your SSDI benefits to cover the payments that were already made. Insurers generally have a legal right to offset your monthly disability benefits based on the amount that you are receiving from SSDI. This prevents so-called “double-dipping” of disability benefits.
Note: LTD beneficiaries are generally required to notify their insurance company when their Social Security disability claim is approved.
Social Security Disability Claims are Slow—an LTD Offset May Be Retroactive
While there are certainly some exceptions, the reality is that most long term disability claims are processed before a Social Security Disability Insurance (SSDI) claim is processed. This is especially true in cases where an SSDI claim is initially denied in error by the federal government.
When this occurs, an insurance company can file for an offset to retroactive recoupment, a so-called overpayment of benefits. Most often, this becomes an issue with Social Security backpay. An insurance company may try to claim a share of some (or all) of the back pay authorized by the Social Security Administration in order to offset long term disability benefits that were already paid out.
Know the Three Main Ways Insurers Address Social Security Disability Overpayments
Most people and families receiving disability benefits are dealing with some degree of financial strain. For this reason, an insurance company trying to recoup an offset of a SSDI overpayment can create some challenges. Here are three main ways that insurance companies deal with Social Security disability overpayments and offsets:
- Demand Immediate Reimbursement: In general, insurance companies will demand an immediate reimbursement of any overpayment. This means that as soon as you receive SSDI backpay, the insurer may ask you to hand over the full amount that is owed—potentially the entire back pay award.
- Work Out a Settlement: In some cases, insurers will work out LTD offset settlements with policyholders/beneficiaries. Most often, a settlement involves the insurer reducing future LTD payments in order to recoup the amount owed via an offset more gradually. This may be an option for a family with financial hardship.
- Cut Off LTD Benefits: In the most drastic circumstances, an insurer will move to cut off all future monthly LTD benefits to begin recouping the overpayment. Typically used as a last resort, insurers may have the right to cut off future benefits if an overpayment has not been repaid.
Get Help From a Skilled Social Security Disability Lawyer
Social Security disability claims are complicated, especially for people trying to figure out how LTD benefit offsets will affect their ability to recover compensation. If you have any specific questions or concerns about long term disability benefit offsets, an experienced Social Security disability lawyer will protect your rights.
