What’s the Difference Between Social Security Disability and Long Term Disability?

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While both Social Security Disability and Long Term Disability benefits are designed to provide income in the event of a medical disability, the programs differ in at least five different ways: (1) the way they are funded; (2) the standards of disability; (3) the eligibility periods; (4) the benefit amounts; and (5) the claim and appeal processes.  

Below we expand on the five key differences between Social Security Disability and Long Term Disability benefits. 

Are LTD and SSDI benefits funded differently?

Yes.  Long term disability is a privately funded benefit, and Social Security disability benefits are a governmental program.

Social Security Disability

Social Security Disability benefits are primarily funded through dedicated payroll taxes paid by U.S. workers and employers.  In 2023, employers and employees each pay 6.2%.  Self-employed individuals pay 12.4%. Taxes are only assessed on the first $160,200 of income.  Funds also come from taxes assessed on Social Security benefits, trust-related interest income, and trust-related reimbursements.

Long Term Disability

Long term disability insurance benefits provided as an employee benefit (“group” long term disability benefits) are funded quite differently.  The overall cost of the plan is privately negotiated between the employer and the insurer.  Often, group long term disability insurance is fully paid for by the employer with no employee contribution.  In some cases, the employee may contribute to the cost by paying a portion of the premium or the full premium.

Do LTD and SSDI benefits have different standards of disability?

Yes.  While both long term disability benefits and Social Security disability benefits protect individuals who are unable to work, they define what it means to be disabled differently.

Social Security Disability

To obtain Social Security Disability benefits, an individual must generally prove an inability to engage in any substantial gainful activity that is expected to last for a continuous period of at least 12 months or expected to result in death.  Social Security looks at overall employability and skills in determining whether the medical condition stops the individual from performing work in the national economy.  There are limited instances where Social Security will “presume” disability if certain medical criteria are satisfied.

Long Term Disability

The “disability” standard in long term disability policies is often easier to meet.  The definition of disability will vary by policy, even among policies issued by a single insurer.  There are typically three types of possible definitions: own occupation; any occupation; and hybrids.

    • Own Occupation: Many policies define “disability” as simply being unable to perform one’s own occupation (sometimes called “regular occupation”).  This definition is the easiest to meet because the claimant does not need to be totally disabled from all jobs to receive benefits.  Under this definition, a claimant need only prove they cannot perform the essential duties of their own occupation – meaning the occupation performed at the onset of disability.
    • Any Occupation: Under an “Any Occupation” definition of disability, a claimant must prove that they cannot perform any occupation that they are, or may become, qualified for based on education, training, and experience.  This is a more difficult standard to meet.  The claimant must prove not only an inability to perform the duties of their own occupation, but also an inability to perform the duties of any other reasonable occupation.
    • Hybrid: A Hybrid definition of disability combines aspects of both the “Own Occupation” and “Any Occupation” definitions.  With a Hybrid definition, the claimant generally must prove an inability to perform their Own Occupation for a specific period time (typically 24 months), after which the claimant must prove they cannot perform Any Occupation. 

Do LTD and SSDI benefits have different eligibility periods?

Yes.  While both long term disability benefits and Social Security disability benefits have waiting periods before an individual is eligible for benefits, the waiting periods are different.

Social Security Disability

The waiting period for Social Security Disability benefits is five months.  This means that claimants are not eligible to receive benefits during the first five months of disability.

Long Term Disability

The waiting period for long term disability benefits is called the “elimination period.”  The elimination period is dictated by the policy terms.  Typically, the elimination period is 180 days.  However, the waiting period may be shorter or longer.  Elimination periods typically do not exceed 365 days.

Do LTD and SSDI benefits differ in benefit amount?

Yes.  Long term disability benefits and Social Security disability benefits are calculated by different benefit formulas.

Social Security Disability

The Social Security Disability benefit amount that a claimant will receive is typically calculated using “average indexed monthly earnings.”  A formula is then applied to this average to calculate the claimant’s primary insurance amount, known as the “PIA.”

Long Term Disability

ltd benefit amountThe long term disability benefits that a claimant will receive depends on the policy terms.  However, it is almost always higher than the Social Security benefit amount.  

Most often, the benefit amount represents a fixed percentage – typically 60% – of the claimant’s “pre-disability earnings.”  The “pre-disability earnings” usually means the claimant’s earnings at the onset of disability.  Depending on the policy, this may include salary, bonuses, incentive compensation, etc.  There is almost always a cap on the maximum monthly benefit payable.  

The benefits under a group policy are usually reduced by the amount an individual receives for Social Security Disability and other income benefits such as workers' compensation.   For instance, if an individual is entitled to receive $3,000 per month in Social Security benefits, an individual's $10,000 per month long term disability benefit, will be reduced to $7,000 per month.

Do LTD and SSDI benefits have different claims and appeals processes?

Social Security Disability

If a Social Security Disability claim is denied, the claimant can request a hearing and – in some states – reconsideration prior to the hearing.  The hearing is handled by an Administrative Law Judge (“ALJ”) who will decide the fate of the claim.

If the ALJ denied the claim, the claimant can appeal further to the Appeals Council and, if necessary, file an action against the Social Security Administration in federal district court.  The district court judge has the power to grant benefits or remand the case back to Social Security for further administrative proceedings.

Long Term Disability

If a long term disability claim is denied, the claimant is typically required to file an administrative appeal.  This does not involve a hearing.  Rather, the file is referred to an appeals representative at the insurance company who will decide the fate of the claim.

If the claim is denied on appeal, the claimant can typically commence an action against the insurance company in federal district court if the coverage was provided as an employee-benefit subject to ERISA.  The judge will have the power to grant benefits or remand the case back to the insurer for further consideration.

Call today to help maximize your disability benefit security

erisa disability attorneyUnderstanding the difference between Social Security Disability and Long Term Disability is key to maximizing your disability benefit security.

At Riemer Hess, our New York ERISA attorneys are highly familiar with how SSDI income affects your LTD benefits.  We understand the best strategies to keep your disability claim in good standing, and how to proactively avoid common issues that cause insurers to try to terminate benefits.

The attorneys and staff at Riemer Hess know how to keep your disability benefits secure.  Contact an attorney at Riemer Hess today at (212) 297-0700 or click the button below to schedule a call with our Client Intake and Relationship Manager to discuss your long term disability claim.

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