When disability forces someone to stop working, they must determine how much they can receive in disability benefits so that they can appropriately plan a budget. The amount someone can receive in disability benefits depends on numerous factors, but it is important to be aware that your disability benefits may be reduced by other income you receive. Applicable offsets may apply to either your claim for long term disability benefits or Social Security disability benefits.
Long Term Disability Benefits Can Be Offset By Many Types of Additional Income
The most important thing to remember is that you must review your long term disability policy carefully to determine which types of income offset your long term disability benefits. Typically, if you receive LTD benefits through your employer as part of a group benefit plan, then Social Security disability benefits will reduce the amount of long term disability benefits you receive.
For example, if you are eligible to receive $3,000 per month in gross long term disability benefits, but you also receive $1,200 in Social Security disability benefits, then your long term disability benefits will be reduced to a net monthly benefit of $1,800 ($3,000 - $1,200 = $1,800). If you have received long term disability benefits and your Social Security disability claim is pending, then you may eventually owe the insurance company for an overpayment once your Social Security disability benefits are approved. Keep in mind that Social Security disability benefits paid to your dependents will further reduce the amount of long term disability benefits you receive.
Other kinds of income that usually reduce your long term disability benefits include Social Security retirement benefits, other federal or state disability benefits, workers’ compensation, Veterans Administration benefits, retirement plan benefits funded by the employer (not tax-deferred individual retirement savings), unemployment compensation benefits, disability insurance benefits paid from another policy, and any amounts paid because of loss of earnings where a third party agreed to pay a settlement, judgment, or arbitration.
In some cases, other sources of income will be greater than your long term disability benefits. For example: you receive $2,300 per month in Social Security disability benefits, but your gross long term disability benefits are only $2,200 per month. If this happens, then you are still eligible to receive the minimum benefit that is allowed under the long term disability policy. Generally, the long term disability policy will state that a minimum benefit of 10% of your gross long term disability benefit or a flat amount - such as $100 - will still be payable.
Social Security Disability Benefits Aren't as Affected
Fortunately, there are less kinds of income that reduce Social Security disability benefits. However, workers' compensation may still be an offset to your Social Security disability benefits. VA benefits and long term disability benefits will not affect the amount of Social Security disability benefits you receive.
It should be noted that there are two Social Security disability programs: 1) Social Security Disability Insurance (SSDI) and 2) Supplemental Security Income (SSI). In short, SSDI eligibility is based upon your work history and having Social Security taxes deducted out of your paychecks. If you have a steady work history and have worked within the last 5 years, then you will likely be eligible to apply for SSDI benefits.
Individuals with very limited financial resources may be eligible for SSI benefits. If you receive other sources of income, then it is unlikely that you will be eligible to receive SSI benefits. See here for a full explanation of eligibility for SSI benefits.
Contact Keller & Keller to Learn More
If you have been denied Social Security disability or long term disability benefits, contact Keller & Keller today at 317-926-1111 for a free consultation.