Once again DCS is beginning to receive a lot of questions and comments surrounding the issue of whether or not a disability insurer can offset or reduce monthly benefits by the amounts received as dependent awards.
When DCS is asked the question, “they can’t take the benefits from my children can they?”, my answer is always, “Yes they can, if the policy says they can.”
Unfortunately, many people are taken by surprise by the fact that disability insurers can “offset” or reduce monthly benefits by the amount awarded to children and dependent family members. It must be quite a shock to the disabled person to find out after-the-fact that SSDI and other sources of income can create an overpayment for which the insurance company will want to be repaid.
I’ve written many, many articles over the last eight years suggesting all US employees covered by an employer’s group sponsored plan should contact their HR Benefit Representative shortly after their first enrollment and obtain a “certificate copy” of their policy and read it.
Study the provisions. Ask questions. The best defense any covered claimant has is knowledge. What are you, the insured entitled to? And, more importantly, what is the disability insurer entitled to? Sickness and injury always come as a surprise, and given today’s need for financial security, wouldn’t you rather know what your LTD policy says before you become disabled and have to leave work?
For example, this is what a typical Unum group LTD policy might say under the contract category of “What are Other Income Benefits?”:
“The amount of disability or retirement benefits under the United States Social Security Act, the Canada Pension Plan, or the Quebec pension Plan, or any similar plan or act, as follows:
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Disability benefits for which you are eligible; and
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Your spouse, child or children are eligible because of your disablity.”
Are you aware that nearly all group LTD plans allow the disability insurer to “offset” or reduce monthly benefit for SSDI for both primary AND family social security? It’s in your group policy provisions. Whether or not to repay UNUM and other disability insurers with the lump sum award is a different story for a different newsletter, but right now my concern is that these issues are taking people by surprise and they shouldn’t be.
Long term disability plans are sold to employees as part of their employer benefit package, especially if they are not contributory (free). It’s always been my opinion that all employees should know and understand the value of their benefits, and LTD is no exception. (Defined benefit pension plans also fit into this category.)
Please. I urge everyone to obtain a copy of their group sponsored STD/LTD plan and read the provisions. Don’t be taken by surprise by an “offset” which reduces your disability income to a level you just can’t afford. If you’ve read any of my other articles, you should know I always recommend the claimant have a Plan B and know of the availability of additional resources if the income from LTD minus offsets isn’t enough to live on.
Knowledge is your only weapon when it comes to knowing your benefits and being able to survive financially during a period of total disability. You should understand ALL of the provisions of your policy BEFORE a disabling sickness or injury. Don’t wait. It’s that important.
By the way, Primary and Family SSDI benefits aren’t the only sources of income that are reductions from group benefits. Other offsets include: Worker’s Compensation, or other occupational benefits, retirement income (and family retirement income) benefits from other group disability plans, governmental retirement benefits and automobile disability insurance.
The sources of income generally NOT offset include income from: 401(k) plans, profit sharing plans, thrift plans, tax sheltered annuities, stock owndership plans, non-qualified plans of deferred compensation, pension plans for partners, military pension and disability income plans, credit disability insurance, franchise disability income plans, a retirement plan from another employer, IRA accounts, individual disability income plans and salary continuation or accumulated sick leave plans.
We strongly recommend all employees covered by group employee STD/LTD plans obtain copies of their policy upon enrollment, and understand very clearly in advance what is and isn’t a reduction from benefits.
