Question About LTD and Social Security

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Good morning!

I'd like some input on the wording of a long-term disability policy involving a critical matter. (Also, I'd greatly appreciate any input, even though I am not an agent.)

My husband recently transitioned to long-term disability, and he has private policy from his employer. As well, Social Security approved him for a monthly benefit. It's only $500 per month as most of my husband's work history is in Europe, not the United States.

Here's my question, the private insurer has been subtracting the $500 from my husband's monthly long-term disability benefit, which is 60 percent of his gross monthly income.

Based on something I read in his policy, I'm beginning to wonder if that is *allowable*.




The policy states that his monthly LTD benefit is:

1.) the lesser of:

a.) 60 percent of the your (sic) Basic Monthly Earnings rounded to the nearest dollar; or

b.) $8,000; and

2.) minus Other Benefits which you and your dependents receive for that month when added to the Monthly Benefit exceeds 70 percent of your Monthly Basic Earnings at the time you become (sic) Disabled for that month.




So, as a recap, hubby's LTD is a: 60 percent of basic monthly earnings and b: minus other benefits which you and your dependents receive for that month when *added* to the monthly benefit *exceeds 70 percent* of your monthly basic earnings at the time you become disabled for that month.

My new thought is that 60 percent of my husband's basic monthly earnings plus $500 from Social Security do *not* exceed 70 percent his basic monthly earnings. My new view is that the insurer should *not* be able to subtract hubby's pathetic Social Security income from his
monthly benefit. (The only really bright spot to all of this is that hubby's long-term disability income is *not* taxable because he paid the premiums with *post-tax* dollars.)

(For argument sake, let's say hubby's income is $100,000 per year. With that figure, his monthly benefit would be $5,000. Under that scenario, I would argue that hubby is allowed to earn $833 in Social Security benefits *before* the insurer can *start* subtracting Social Security benefits; 70 percent of gross monthly income would be $5,833.

Using the hypothetical $100,000 figure, I say the insurer cannot subtract $500 from the monthly benefit as that does not put hubby's income *at or over* $5,833. Under the hypothetical figures, I'm sure the insurer would like to cap combined monthly income at $5,000, or 60 percent of gross monthly income, from *both* long-term disability income and Social
Security.)

Does anyone have any insight before I contact the insurer? Thanks in advance for all insight.
 
Many group disability plans include the right to offset benefit by any among received from Social Security or similiar social benefit. You should check and see if the plan your husband's employer carried has such a provision.
 
As VolAgent has stated, it's common practice for a group LTD carrier to subtract SSDI benefits received from monthy benefits paid on a group LTD policy.

Here's what I would do though if you believe there is a special circumstance.

I'd get the policy documentation you have that makes you believe otherwise. I would contact the HR department at your husband's employer. I would also find out who the agent of record is on the group LTD plan. There's a few ways to do this, either the HR department. Or look up the plan on a web site like FreeErisa (www dot freeerisa dot com). The public filings will most likely give you the name of the agency, you'll have to do some leg work from there. If you can get the agent, and he or she isn't a toad, you'll have some firepower in having him or her working with you as well.

Again, keep in mind that what is happening is usually the norm. Good luck nonetheless.
 
The policy states that his monthly LTD benefit is:

1.) the lesser of:

A.) 60 percent of the your (sic) Basic Monthly Earnings rounded to the nearest dollar; or

B.) $8,000; and

2.) minus Other Benefits which you and your dependents receive for that month when added to the Monthly Benefit exceeds 70 percent of your Monthly Basic Earnings at the time you become (sic) Disabled for that month.

I think this policy allowable.
Many of you applying for Social Security Disability may also be applying for or getting Long Term Disability benefits from an insurance company or employer. One thing you may already know is that the insurance company pays less if you get SSDI. Most LTD policies require that you apply for Social Security Disability Benefits. They may even recommend a representative to help with your Social Security claim. My thoughts on using the insurance companies recommended representative can be found on my other blog at my Ultimate Social Security Disability Guide web site. One issue which you might want to keep in mind is that the LTD policy usually changes the definition of disability after 2 years so many people are denied after getting these benefits for two years. Many insurance companies also only pay for a psychiatric disability for two years. Check your policy and read it carefully. Social Security Disability and Long Term Disability claims when being pursued at the same time can have many issues to deal with so make sure to consult with a lawyer if you have both.
 
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