Yes. The LTD benefit will typically just be offset and reduced by the SSD benefit, while crediting any SSD attorney fee award first.
In most cases, filing for both will substantially increase your financial security. When considering filing for disability, you should always check to see whether you have disability insurance coverage through an employer and/or private insurer. If so, you should file an LTD insurance claim as soon as possible. Delay or failure may result in devastating consequences, such as complete loss of coverage or irreversible denial due to failure to meet strict policy deadlines.
Below, you’ll learn about: (1) how SSD benefits offset LTD benefits; (2) why filing for both SSD and LTD benefits maximizes your financial security; (3) how to look for an LTD claim; and (4) why delay or failure to file an LTD claim may cause devastating consequences.
How SSD Benefits Offset LTD Benefits
It is possible to receive both SSD and LTD benefits at the same time, but the SSD benefits will offset and reduce the LTD benefits. The offset calculations are simple, but may become more nuanced if dependent benefits, COLA increases, or earnings credits are involved.
How Are the Offsets Calculated?
Offsets to the LTD benefits are calculated both retroactively and in the future. This is because the LTD process is much faster than the SSD process. Most claimants receive an LTD decision within a few short months, whereas they must typically wait a year or more to receive their SSD. Therefore, you may receive a lump sum award of retroactive SSD benefits after having already received LTD benefits for many months. In that case, your LTD insurer will invoke the policy’s “offset provision” that requires you to “reimburse” the insurer for the SSD benefits paid during the same eligibility period for retroactive benefits. A monthly offset will be applied going forward as well.
For example, Susan files for SSD and LTD benefits at the same time. The LTD claim is quickly approved and Susan begins receiving $5,000 in monthly LTD benefits. 10 months pass before her SSD claim is approved. She receives a SSDI retroactive benefit award in the amount of $20,000, plus an ongoing SSD benefit each month. At that point, Susan has already received $50,000 total in LTD benefits ($5k/month @ 10 months = $50k). Under the LTD policy terms, Susan must reimburse the $20,000 SSD awarded to her LTD insurer if the benefits period of retroactive SSD and LTD eligibility overlapped. Going forward, Susan’s LTD benefit will be reduced each month by the monthly SSD benefit that she receives.
How Do SSD Attorneys’ Fees Get Paid?
Most LTD insurers will reduce or “credit” the total offset by any SSD attorneys’ fees that are paid. This effectively allows the SSD attorney to get paid by the insurance company.
For example, Susan receives a retroactive SSD award of $20,000, from which $5,000 is deducted and paid to her SSD attorney. This leaves Susan with a net retroactive award of $15,000. Susan’s LTD insurer will only claw back Susan’s $15,000 net SSD award so that her SSD attorney is appropriately compensated.
The reasoning makes sense. If the LTD insurer did not permit the SSD attorney to get paid off the top, the LTD insurer would be inappropriately disincentivizing SSD attorneys to represent its clients in their SSD claims. That would not serve the LTD insurer’s interests. After all, the LTD insurer wants SSD claims approved so it can claw back the offsets. Of course, an SSD attorney will help increase the chances of approval.
Do SSD Dependent Benefits Create an Offset?
Yes. Many SSD recipients are surprised to hear that any retroactive and future dependent benefits received will create a similar offset.
Do COLA Increases Create a Higher Offset?
No. Annual cost of living adjustments (“COLA”) to SSD benefits generally do not cause a higher offset to the LTD benefit.
Do Earnings Credit Increases Create a Higher Offset?
Yes. Unlike COLA increases, increases to the SSD benefit due to additional earnings (for example, a part-time work attempt) will create a higher offset to the LTD benefit.
Why Filing for Both SSD and LTD Maximizes Your Financial Security
Filing for both the SSD and LTD, where possible, will almost certainly help you obtain maximum financial security.
Filing for Both Can Increase Your Net Disability Income
Despite the offsets, you will have higher net disability income if you file for both LTD and SSD.
The LTD benefit is typically higher than the SSD benefit. But to get the LTD benefit, you are likely to be required to file for SSD benefits. Indeed, most employer-provided LTD policies obligate you to file for SSD benefits as part of the LTD eligibility requirements. This is so that the insurer can invoke the offset provisions – thereby offsetting the insurer’s liability.
If you file for both, you will have a higher total net income, plus get to pocket any COLA adjustments to the SSD benefit. This is particularly important because most LTD benefits do not provide for COLA increases. The initial LTD benefit you will receive will likely remain unchanged until you reach full retirement age – often decades after the approval. Filing for Both Will Provide a Disability Income Safety Net.
If either benefit is denied or terminated, you will have a safety net of disability income if the other benefit is secure.
For example, Dave files for both SSD and LTD. He is approved for both. Five years later, the LTD insurer terminates his benefits. He continues to have disability income from his SSD benefits while he files an appeal for his LTD benefits – creating greater financial security.
For another example, say that Dave filed for both SSD and LTD. His LTD is approved quickly but his SSD takes 2 years to get approved. During those two years, Dave had greater financial security because he was receiving the LTD benefits.
Filing for Both May Lead To Better Health Coverage
Many large companies will provide health insurance coverage to you if you are receiving LTD benefits. This can be a critical benefit to ensuring financial security before you become eligible to receive Medicare though Social Security. Once you become eligible to receive Medicare, the LTD benefit status may enable you to get health insurance coverage that is better than Medicare alone.
How to Determine if you have an LTD Claim
Use this checklist to help you identify if you have a possible LTD claim. If you answer “yes” to all questions, there may be a viable disability claim to be filed.
- Did your employer provide you with long term disability insurance and/or did you purchase your own private coverage?
- Do you have a physical and/or psychological condition that has been preventing you from meeting your regular work demands?
- Have you been receiving medical treatment for your condition?
- Do you believe your doctor may support a disability claim for you?
Quick Tip: A common misconception is that the medical condition must be “devastating” or “severe” to be disabling. The bar is often much lower for LTD claims. Typically, the medical condition need only prevent you from meeting the demands of your own occupation.
Why Delay or Failure to Identify an LTD Claim May Cause Devastating Consequences
Delay or failure to identify a potential LTD claim may have devastating consequences. If the coverage is provided as an employee benefit, you may completely lose your coverage if the claim is filed following termination of employment.
Additionally, every long term disability policy – whether provided through an employer or purchased privately – contains very short deadlines to provide “notice of claim” and “proof of claim.” If these deadlines are exceeded, your claim may be denied without recourse.