Impact of Other Benefits on Your Group Disability Income Insurance Benefit

Your long-term group disability insurance policy that falls under ERISA most likely has provisions allowing the insurance company to offset (reduce) your monthly benefit with other social benefit programs and sometimes even retirement benefits you receive. Many policies also give the insurance company the right to offset “estimated benefits” to which you would be entitled if your claim is ultimately approved. As a result, the plan administrators have an incentive to assist you to obtain Worker’s Compensation and Social Security benefits because the insurance company’s liability is reduced by any other benefits received by you.

Social Security claims

Often the insurance company will arrange for a third party firm to handle your Social Security claim. Be cautious here: there may be no attorney-client relationship with the third party. Therefore, any information you give to that third party may ultimately be forwarded to the insurance company for their use in reviewing your claim with them. Unfortunately, the medical proof of disability cannot be forwarded by the Social Security Administration or the third party to your insurance company. As a result, it is possible that the insurance company retains the benefits of the Social Security offset, usually in a substantial lump sum repayment, but then later terminates or denies your disability claim as lacking proof of disability.

Workers Compensation settlements

The policy itself must be examined to determine the impact of a Workers’ Compensation award on the amount of your benefits.

One of the most important aspects of the relationship between Workers’ Compensation and group disability income insurance claims occurs in the execution of a release pertaining to the Workers’ Compensation claim. You can inadvertently waive your group disability income insurance benefits by executing a Workers’ Compensation settlement agreement that releases the employer from all unknown claims if the employer can successfully assert that it was not formally notified of your anticipated group disability income insurance claim at the time of the settlement.

Also, the apportionment of the settlement can affect the right of the insurance company to offset the full amount of the Workers’ Compensation settlement against your group disability income insurance benefits. Every group policy is a separate insurance policy and contains different terms regarding the types of benefits that may be offset. Often a policy will offset only the portion of a Workers’ Compensation award or settlement that is allocated to loss of income. Under those policies, it is important to structure a Workers’ Compensation settlement to maximize the group disability income insurance benefits available to you.

With all of these offset situations, you would be wise to seek legal counsel to guide you through the details to make sure you don’t unwittingly give away benefits to which you are entitled (or worse, pay back an alleged overpayment).