Receiving SSDI, knowing who pays for what, and private long-term disability insurance (LTD) can get a little confusing when combined. It is common for LTD plans to require that you apply for Social Security Disability Insurance (SSDI) if it’s likely that you are permanently disabled. If you do qualify for SSDI, the insurance company reduces the amount of your monthly LTD benefit by the amount of your monthly SSDI check. They call this an “offset” and having this provision in your group LTD plan helps keep the cost of your LTD benefit down for you and your employer.

The good news is that your insurance carrier keeps paying you the full LTD amount every month while you can’t work and are waiting to be approved for SSDI (which can take years these days). And often the LTD insurer will pay the fee for a SSDI representative to help you through the SSDI process, or reimburse you for this expense. (If you don’t get reimbursed, the fee could be tax deductible on your federal tax return.) But the process can get complicated. If you waited a long time to get SSDI, you get a retroactive SSDI payment from the government, paying you back to when you first qualified for the SSDI benefit. That means you were getting a full (without an offset) LTD payment, plus SSDI for that time period. LTD plans usually require you to return this overpayment, and usually, the easiest way for you to do this is to reimburse them using your retroactive SSDI benefit. Some SSDI representatives assist you with this by coordinating the reimbursement for you.

It may not seem that way at first, but you didn’t lose any money in this process. Going forward, you will receive all of the money that you are supposed to under your private and public disability plans, it’s just now coming from two sources (LTD and SSDI) instead of one (LTD). LTD plans are designed to work with SSDI benefits. Remember that both you and your employer contributed FICA taxes toward the SSDI program. Also, it’s important to note that if you do not reimburse your LTD plan, your LTD benefits may be negatively affected. All of this is contingent upon your individual plan of course.

Regards,
Mike Stein