How Does Approval for Social Security Disability Affect My ERISA Long-Term Disability?

How Does Approval for Social Security Disability Affect My ERISA Long-Term Disability

Some people unexpectedly find themselves with long-term health conditions that keep them from working. When this happens, you may have some options for replacement income, including Social Security Disability Insurance and the long-term disability insurance your employer maintains that is regulated by the Employee Retirement Income Security Act of 1974 (ERISA)

Perhaps you applied for both Social Security Disability Insurance (SSDI) and your employer’s long-term disability insurance. You now wonder, How does approval for Social Security Disability affect my ERISA long-term disability? Below we explain the potential consequences of being approved for both long-term disability and a Social Security Disability claim. Contact us today for additional information or to fight any reduced or denied claims.

The Difference Between Long-Term Disability Insurance and Social Security Disability

Most people with a work history are eligible for two sources of financial assistance when they have a long-term health condition: Social Security Disability Insurance and long-term disability through their employer. Before we explain how these interact, you must first understand the difference between long-term disability insurance and Social Security Disability Insurance benefits. 

Social Security Disability Insurance

Social Security Disability Insurance (SSDI) is a federal earned benefits program for people who can’t work for a year or more because of a disability. Because it’s earned, you must have worked, paid into the program, and earned enough credits to be eligible. If you’ve worked, you’ve likely noticed the deductions for this on your pay stub.

The U.S. Social Security Administration (SSA) administers Social Security Disability benefits, and eligibility requirements are governed by the Social Security Law. The SSA recommends applying for Social Security Disability as soon as you become eligible because it can take some time to process and approve an application. You have 60 days to appeal the decision if the SSA denies your application.

Long-Term Disability Insurance

Long-term disability insurance provides income to people affected by a disability. You can purchase long-term disability insurance directly from an insurance agency. Many employers also offer long-term disability insurance to their employees. Typically, long-term disability insurance covers a certain percentage of the employee’s income. ERISA governs employer-provided long-term disability insurance

The insurance plan documents generally describe eligibility and the application process for long-term disability. The plan must also comply with ERISA. The insurance company must give you at least 180 days to file an appeal if they deny your claim

How These Programs Work Together

Social Security Disability and ERISA benefits under employer-provided long-term disability insurance provide income replacement to workers with disabilities. Approval for both long-term disability insurance covered by ERISA and Social Security Disability Insurance may affect your eligibility for one or the other.

Many employer-provided long-term disability plans require claimants to also apply for Social Security Disability. Typically, employees are approved for long-term disability insurance much faster than for Social Security Disability. 

SSDI Payments Reduce Long-Term Disability Insurance Payments

One way approval for Social Security Disability may affect ERISA long-term disability is through a potential reduction of your long-term disability payments. Suppose someone is approved for Social Security Disability and long-term disability. In that case, the long-term disability insurance carrier will reduce the amount they pay by the amount you’ll collect in Social Security Disability. For example, suppose your long-term disability insurance company pays $2,000 monthly, and Social Security Disability approves you for $1,000 per month. In that case, your long-term disability insurance company will reduce your monthly payments to $1,000 per month.

Issues with Overpayments

Being approved for both long-term disability covered by ERISA and Social Security Disability has another potential unforeseen consequence. Your long-term disability insurance carrier may seek reimbursement for overpaying you once you receive your Social Security Disability approval. 

Approval for Social Security Disability Insurance takes a long time. Once a person is approved, they’ll typically receive back pay for the time their application was pending. Your long-term disability insurance carrier will then charge you for the monthly difference between the amount they paid you and the amount they would have paid you had the Social Security Disability benefits been paid sooner.

So how does long-term disability affect Social Security Disability in practice? In the example above, if your Social Security Disability application took ten months for approval, you’ll receive ten months of backpay for $10,000. Since your long-term disability payments would have been $1,000 instead of $2,000 during that time, your insurance carrier will seek the $1,000 per month they believe they’ve overpaid you, equaling $10,000. 

Contact Our South Carolina ERISA Attorney with Questions About Disability Insurance

The rules and requirements for disability under various employer-administered and government disability plans are complicated. It would help if you had an ERISA attorney who works for people with long-term disabilities fighting for their benefits. At the Peace Law Firm, we represent claimants in ERISA claims, never employers or insurance companies. Contact us today for a free case evaluation.

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