An interesting case came up last week involving Principal and dependent offsets. It still amazes me when claims handlers still think they can bamboozle people about things that are not true in order to profitably benefit. The facts might be a little confusing, but I’ll try to explain as best I can.
When Principal refused to remove the offset for a SSDI dependent who turned 18 I began investigating on behalf of my client. One of my client’s three children turned 18 and received a letter (April 2024) from SSDI that benefits were no longer payable. From April – June Principal refused to delete what we thought was the “offset” for dependent benefits since the daughter was no longer receiving them.
When I called the claims rep I was told that when one dependent “drops off”, SSR increases the benefits of the remaining children. The rep explained that SSA always pays dependents 50% of the primary person’s benefit, and that’s true. Each eligible dependent under 18 receives half of the original award.
BUT……SSR does NOT increase the benefit of the remaining dependents under 18. Why would SSR do that? In my 25 years of involvement with SSDI, I have never seen an increase letter from SSA informing of increased benefits when one dependent “drops off”. And, I’m not referring to COLA either. According to Principal, the remaining dependent coverage increases because the children under 18 are eligible for 50% of the mothers award; therefore, the primary claimant’s disability benefit does not change.
This is really false information, and a direct manipulation and misrepresentation of how SSDI offsets work. If the intent of Principal’s Plan is to offset 50% of the primary holder’s SSDI benefit, regardless of the number of dependents, then it should say that. To allege that the primary insured’s benefit amount won’t change because SSA increases the remaining dependents benefits is a lie since increasing each dependent’s benefit would mean paying greater than 50% of the primary award.
In the past, I have actually recommended Principal as an upright and honest insurer, but I’m going to stop doing that. The “fix” here, is to first prove SSA does not increase remaining dependent coverage when one child “drops off” as a dependent. And second, to challenge Principal’s Plan (contract) wording authorizing the offset for 50% of Primary benefits, regardless of the number of dependents.
When I asked the Principal rep to send me a copy of SSA’s dependent coverage increase letter, I was told, “There isn’t one.” So, by what authority is Principal allowed to do what they’re doing? Principal would probably say, “The Plan gives us authority to offset 50% of the primary benefit regardless of the number of dependents.” If this is true, then Principal needs to stop giving claimants misinformation about increased SSA dependent benefits and just point to the Plan provisions as authority. The mother will be looking forward to SSA increases for the remaining children when none will be forthcoming.
This is one of the reasons why I do what I do. There is so much misinformation out there, and, my client actually believed Principal’s justification story, which is a total misrepresentation of what Principal is actually doing.
DCS, Inc. represents the “truth.” I have often said that “the truth works” for insureds and claimants, and one would think it should work for insurance companies as well. If the Plan actually gives Principal the authority to offset 50% of the primary award, there is nothing the claimant can do, other than to recognize the fact the rep gave false justification for the regular benefit staying the same.
One of my pet peeves is encountering deliberately false or misrepresented information because in the end, insureds and claimants are harmed by it. I can’t believe Principal explained its position in this manner and they will not get my referral recommendation in the future.
