One of the important issues that I think every ERISA short term/long term disability claimant needs to know about is what offsets or “other income benefits” are and how they affect short term and long term disability benefits. Basically, the insurer gets credit for any other income that a claimant receives from other sources. Here is a sample “Other Income Benefits” section from a long term disability policy.
“Other Income Benefits An Employee for whom Disability Benefits are payable under this Policy may be eligible for benefits from Other Income Benefits. If so, the Insurance Company may reduce the Disability Benefits by the amount of such Other Income Benefits.
Other Income Benefits include:
Other Income Benefits sections are very broadly written so that, essentially, any income received by a claimant will be deemed “other income benefits” and, therefore, an offset (reduction) to short term/long term disability payments. By way of example, if a claimant is drawing $2,000 in long term disability benefits per month and is awarded $1,400 in Social Security Disability benefits the long term disability payment becomes $600 per month.
The difficulty with other income happens when it takes a few months or even years for a claimant to be awarded other income benefits. During this time, it is likely that the claimant is drawing an unreduced disability benefit from the insurer. Using the above example, if it takes the claimant 18 months to be awarded Social Security Disability benefits the claimant will draw the full $2,000 until Social Security Disability is awarded. Once Social Security Disability is awarded, a check for back benefits will be issued to “catch up” the payments. These Social Security Disability payments will be backdated for the same period that the claimant has been drawing long term disability, causing the claimant to be overpaid for those 18 months. The disability insurer will then contact a claimant and assert that it should have only paid $600 per month, not $2,000 per month, therefore, the claimant owes the disability insurer back $1,600 per month for 18 months. If the overpayment is not paid back the insurer can withhold future benefits or even institute litigation to recover the overpayment. Consequently, it is very important that all claimants read and understand the other income benefits section contained in his/her disability policy.
If you have a denied ERISA claim, please contact me, Leila Louzri, to discuss at 864-242-6200.
864.242.6200
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