Most professionals have dedicated immense resources just for the opportunity to work in their chosen career path. Whether that includes obtaining advanced degrees or moving across country for the right job opportunity, the personal sacrifices that often come as a prelude to many careers are substantial and life altering. While most professionals maintain focus on their career goals and advancement, many do not think about how they are protected when the worst-case scenario arises:
What happens when unforeseen medical conditions prevent a professional from continuing to perform their work?
As a result, many professionals find themselves in uncharted territory when dealing with a disability.
Many employers sponsor group short-term (“STD”) and long-term disability (“LTD”) plans that ostensibly provide an income to their employees in the event of a disability. However, the eligibility for and benefits provided by those plans can vary greatly and may not be what they seem at first glance. Below are several common considerations that may have a substantial impact on a professional seeking STD or LTD benefits:
1) The loss of a professional license is often not enough to prove your disability. In most cases, a professional’s inability to maintain professional licensure is explicitly excluded by the STD/LTD plan as a consideration for whether that individual is disabled under the plan. As a result, where an individual’s professional license has lapsed or not been renewed due to their disabling health conditions, that fact will not weigh in their favor when the insurer is considering their LTD claim.
2) The own occupation versus any occupation standard of disability will impact your claim. Most LTD plans have definitions of disability that change over time. For illustrative purposes, it is not uncommon for an LTD plan to pay benefits for up to 24 months when a professional is unable to perform the material duties of their own occupation as it is performed in the national economy (i.e., the own occupation period). However, after 24 months of benefits, the insurer may only pay benefits if a professional is unable to perform the material duties of any occupation that they are qualified to perform by virtue of their education or experience. This is a particularly concerning provision for professionals who have often obtained advanced degrees but work in highly specialized careers that may not have easily transferrable skillsets. While you may no longer be able to perform your job, you may not be entitled to benefits if you can transition to some other work that you are qualified to perform even with your disabling conditions. However, what work you can transfer to (if any) is often a hotly contested issue during the claims process.
3) Your total compensation may not be the basis for your potential disability benefit. Many professionals may be used to a pay structure where only a portion of their total compensation is paid through an annual salary and the rest is paid through other deferred compensation (e.g., bonuses, stock options, commissions, etc.) When healthy, such compensation structures often ensure that a professional is adequately paid for their productivity or expertise. However, when dealing with a disability, that payment structure could ultimately reduce the total benefit due to the disabled individual. That’s because many LTD plans pay benefits at a percentage of the employee’s base pay in effect at the time they become disabled. Consider the following example:
- A Vice President is paid a base annual salary of $150,000 at the time of disability with quarterly bonuses based on their division’s performance, which have averaged out to $25,000 per quarter over the last 5 years.
- The Vice President’s employer has an LTD plan that provides LTD benefits at 60% of the employee’s base salary exclusive of bonuses.
- Despite averaging monthly income of over $20,000 over the previous 5 years, the Vice President’s LTD benefit is only based on a monthly income of $12,500 ($150,000 annual salary / 12 months) resulting in a gross monthly benefit of $7,500.
In this situation, the disabled Vice President only receives roughly 36% of his actual gross earnings through the LTD plan at issue despite the Plan’s stated benefit percentage of 60% of predisability earnings.
4) Disabilities caused by mental health conditions may have limited coverage under your employer’s LTD plan. Unfortunately, it is not uncommon for LTD plans to limit the payment of LTD benefits for disability caused by mental health conditions to a fixed time period (often 24 months of total benefits). As a result, an individual with mental health-related disabilities may be covered by an LTD plan but lose the right to continued LTD payments once 24 total months of disability benefits have been paid due to those disabilities (whether those benefits were paid in a single or multiple benefit periods).
5) Other income (including SSDI benefits) may reduce your LTD benefits. Employer-sponsored LTD plans often continue provisions that allow them to reduce your monthly LTD benefit based on other income that you receive. Other income can include both individual and family Social Security Disability Insurance (“SSDI”) benefits as well as early retirement/pension benefits available through your employer due to your disability. Where many individuals assume that their employer’s LTD plan and their SSDI benefits may come close to totaling their predisability income, that is usually not the case. For example, an individual that receives $5,000 per month in LTD benefits that is subsequently approved for a monthly SSDI benefit of $3,000 may have their LTD benefit reduced to $2,000.00 per month. In addition, the insurance company can often seek reimbursement for prior overpayments of LTD benefits that were made while your SSDI claim was pending.
6) Pre-existing condition provisions may prevent your claim from being paid. Many LTD plans have provisions that will not allow payment for claims due to pre-existing conditions. Commonly, those provisions are limited to claims made during an employee’s first year of coverage under the plan at issue. A professional that has previously been disabled or that is experiencing worsening health but is seeking new employment should be aware of such a provision when they are switching employers or considering asserting an LTD claim early in their employment tenure at a particular employer.
While this is not an exhaustive list of potential issues, these are some common group LTD plan provisions that professionals (and all employees) should be aware of when in case they become disabled. However, while you have little control over the provisions of your employer-sponsored LTD plan, these issues don’t mean that you should avoid coverage under an employer-sponsored STD/LTD Plan. To the contrary, these benefits are often provided at a reduced cost (or no cost at all) to the employee and can provide a steady stream of income while other disability benefits claims (such as SSDI) are pending. With that said, there are a few things all claimants should keep in mind as they navigate the STD and/or LTD application process:
1) Don’t take the insurance company’s statements about your eligibility for LTD benefits at face value. Just because the insurer says that you aren’t qualified for LTD benefits doesn’t mean they are correct. Employer-sponsored LTD plans are often governed by the Employee Retirement Income Security Act (ERISA), which imposes strict timelines for claim decisions and appeals. Seeking an attorney’s evaluation of your claim as soon as you hear from the insurance company that they are denying your claim can be the difference in having the decision successfully overturned.
2) Don’t appeal a denial of an LTD claim without speaking to an attorney. Even sophisticated professionals may not be equipped to understand the ins and outs of the employer’s LTD plan and the law surrounding it. If you’ve filed a claim for LTD benefits and it is denied, it is in your best interests to talk to an attorney about that denial before you file an appeal. With an experienced attorney’s assistance, you may be able to gather and submit the necessary information that proves your eligibility for benefits.
3) Get a copy of your LTD plan from your employer and have it reviewed by an attorney. If you have an employer-sponsored STD or LTD plan, request a copy of the plan documents before you apply for disability benefits so that you can review its provisions and coverage and, if necessary, speak to an attorney so that you understand the benefits available to you. Knowing your LTD plan’s provisions in advance can help you mitigate financial stress at the same time that you are dealing with disabling health issues.
4) Consider purchasing an Individual Disability Insurance (“IDI”) policy that is formulated to your particular needs. If you have the means, consider purchasing an IDI policy that is tailored to your needs. Many IDI policies lack the troubling provisions discussed above, such as any occupation definitions of disability and other income offsets to benefits. In addition, IDI policies are typically governed by state specific laws as opposed to ERISA which may provide better assurances that your claims will be paid.
If you or someone you know has questions about their rights to disability benefits, please contact Hawks Quindel at our Milwaukee or Waukesha offices at (414) 271-8650 or our Madison office at (608) 256-0236. Our team of attorneys has the experience needed to help you and your loved ones navigate the disability benefits process.
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