The Intersection of SSDI and LTDI:
How Approval for SSDI Benefits Impacts Your LTDI Benefits
Social Security Disability Insurance (SSDI) is a federal insurance program designed to provide income to an individual who is unable to work due to a medical condition. Similar to long term disability insurance (LTDI), SSDI is designed to protect individuals who become unable to work due to a medical condition. However, LTDI is private insurance, either provided as an employment benefit by your employer or purchased independently by an individual, while SSDI is a public entitlement managed by the federal government.
If you are currently receiving LTDI benefits, you may also be eligible for SSDI benefits. In fact, your LTDI policy may require you to apply for SSDI. Individuals that are already receiving LTDI benefits must realize that SSDI benefits are typically NOT additive, but rather SSDI benefits “offset” LTDI benefits owed the individual. Those unaware of this offsetting relationship can sometimes experience problems when they spend both awards, then realize they must reimburse their LTDI company for a portion of the SSDI benefits the individual had received.
SSDI Benefits Likely Offset LTDI Benefits
Many LTDI policies require you to apply for SSDI benefits. This is because insurance companies are allowed to reduce your LTDI benefit by the amount you receive in SSDI benefits. For example, if your LTDI benefit is worth $2,000 per month, but you are approved for SSDI benefits of $1,500 per month, you may only receive $500 per month from your LTDI company. That said, it is important to keep in mind that even if there is a complete offset (i.e. your SSDI benefits are equal to or greater than your LTDI benefits), many LTDI plans include a mandatory minimum monthly benefit that they must still pay you.
This Offset Can Result in a LTDI Overpayment
Often times, it can take months to be approved for SSDI benefits. As a result, by the time you are finally approved for these benefits, you may be entitled to multiple months’ worth of past-due benefits. These past-due benefits will typically be paid to you in one lump sum, known as “backpay.” However, a large portion of that lump sum must be repaid to your LTDI company if your policy includes the “offsetting” provision mentioned above. This is because your LTDI company will have overpaid you for the months in which you received both your full LTDI benefit and SSDI benefit (in the form of past-due benefits).
Repaying Your LTDI Overpayment
Most commonly, LTDI companies will require you to repay the overpayment immediately upon the receipt of your SSDI backpay. Therefore, it is imperative that you do not spend your SSDI award until you know whether you must repay your LTDI company and, if so, how much you will be required to repay.
If you have questions about your benefits, or if your LTDI company is requesting repayment, contact one of our experienced LTDI attorneys for a consultation. We’d be happy to meet with you.