Since the lump sum payment arises from months in which the claimant was also receiving long term disability, the LTD carrier contractually requires the claimant to turn over his Social Security lump sum payment to the LTD insurance company.

Not surprisingly, folks subject to this type of arrangement are not very happy about it.  Why should the LTD carrier swoop in an grab that $25,000 or $30,000 check?

As I noted in a 2007 blog post about LTD offsets to Social Security claims, the LTD carriers justify this money grab by contending that the price of the group LTD policy reflects an expectation of a Social Security offset.  In other words, the cost of group LTD insurance would, in theory, be higher if there was no offset.

Whether you believe this or not, I think it is safe to say that group LTD policy handbooks do not feature this offset obligation.  Often the first time that SSDI claimants learn that their struggle and stress of pursuing Social Security result in zero dollars is after their SSDI hearings.

Now, apparently, there is a new twist.   A gentleman named Shawn has written me to say that his LTD carrier not only wants his lump sum but they want the lump sum awarded to his kids as auxillaries.   As Shawn points out, his kids (who live with their mother) received nothing in the way of benefits from the LTD carrier – how can the insurance company now claim the lump sums awarded to his kids?

Shawn raises a very good point.  I would first look at the policy handbook, and at the policy itself to see if the auxillary benefits are included in the offset calculation.

If they are I wonder if such a provision might be ripe for  a court challenge.   Is there an enterprising class action lawyer out there who sees an opportunity?

Post from: Social Security Disability Blog

Does LTD Carrier Have a Claim on Auxillary Benefits Paid to Your Kids

I have been working in the medical field for over 13 years and more.  I am on short term disability. Can I apply for ssi due to my job may have caused my problem from lifting patients, pushing, pulling heavy patients to machines and other duties.  This job was very stressful and I am taking anti depressants and I am  seeing a psychiatrist.

Here are my thoughts: Helena certainly has the right to file for Social Security disability.  However, I would advise her to speak to her workers'  compensation lawyer prior to doing so.   Workers' compensation claims can involve a significant amount of money when they settle and filing for disability can impact the value of your workers' compensation claim.

The value of a workers' compensation claim often turns on the uncertainty that exists in terms of the claimant's prognosis for returning to work as well as uncertainty about the claimant's future medical treatment.  When you file a Social Security claim you are basically saying that you cannot work, and you will be bringing Medicare into the discussion in terms of future medical care.  Medicare's involvement also may affect your settlement because Medicare may demand that part of your settlement be set-aside to cover future medical care.

Long term and short term disability claims may also be impacted by a Social Security claim.

Bottom line – I would try to involve your lawyer as a point person to advise you about the various benefits to which you may be entitled and to help you decide about the timing or wisdom of pursuing these benefits.

Post from: Social Security Disability Blog

Should I File for Social Security if I Also Have a Pending Workers' Comp and LTD Claim

An example will illustrate my point.  I have a client "Tom" who has a severe degenerative back condition and depression.  This is not a workers compensation situation because there was no specific "injury" at work – instead, Tom's back problems arose from years of physical labor as well as a prior motorcycle accident. Tom applied for and received LTD benefits in the amount of $1,800 per month.  The LTD policy obligates Tom to apply for Social Security disability.  If Tom is approved, his SSDI benefit will be $1,500 per month.  Under the terms of the policy, the LTD carrier will use SSDI to offset its obligation – instead of paying Tom $1,800, it will only pay him $300.  In addition, the LTD carrier will demand that Tom sign over his past due benefit check as that check represents payment for months that the LTD carrier was paying benefits.

As you might imagine, this scenario does not make Tom happy.  He has to go through the hassle of applying for SSDI benefits, testifying at a hearing and dealing with the stress of the SSDI process only to see a big check from SSDI ($20,000+) go right out the door.  Most LTD carriers will not demand repayment of my attorney's fees – they will only ask for the portion of the past due benefit check that Tom actually receives.

Several years ago I made some inquiries about the fairness of this policy and the LTD carrier's position is that its premium structure is based on the expectation that a certain percentage of LTD beneficiaries will qualify for SSDI and therefore reduce the carrier's exposure.  Fair enough explanation although I wonder how clear this offset policy is made to employees who are pitched to sign up for LTD policies by their employers.

By the way, many private LTD policies do not include this offset or SSDI repayment language – but if you are a prospective LTD purchaser you should ask the question.

In any case, the New York Times piece raised the question of whether this mandatory SSDI application policy was gumming up the works for Social Security disability case processing and adding to the already lengthy delays.  The Times quoted a Social Security spokesman as saying that approximately 18% of SSDI claimants acknowledged privately that they were unqualified, because they could still work and that  iIt is probable that many of these claimants were required to apply" by LTD carriers.  The spokesman went on to say that Social Security processes approximately 2.5 million applicants each year – 18% would equal around 450,000 applicants are wasting everyone's time and causing delays for everyone.

I would suspect – although the Times does not say this – that many of these unwilling applicants do not hire lawyers, meaning that they would be considered "unrepresented claimants" by Social Security.  As any Social Security judge would tell you, unrepresented claimants take up more time and resources because their cases often require extra development and resets.

SSA is apparently floating the idea of changing its rules to treat LTD referred claims differently than regular claims.  There are also a number of "whistle blower" lawsuits that have been filed against LTD carriers for "dumping" unqualified applicants at Social Security's doorstep.  

It will be interesting to see how this all plays out.

Post from: Social Security Disability Blog

Long Term Disability Insurance Carriers Faulted for Forcing Claimants to Apply for SSDI

Here is an example.  If your LTD benefit is $2000 per month and your SSDI benefit is $1,800 per month, once the SSDI kicks in, the LTD carrier will only pay you $200 per month – you get the higher of the two benefit amounts, but not both.  As an aside, some private LTD policies do not have an offset or repayment provision, whereas most employer provided policies do.

As you might imagine, SSDI claimants are not very happy about having to turn over their lump sum payments.  I once asked an LTD underwriter about this type of repayment requirement and his response was that the offset/repayment policy was built into the premium structure – presumably the cost of the policy would be significantly higher if the insurance company could not take advantage of your SSDI award.

Therefore, if you are collecting LTD benefits and you filed for SSDI, find out whether an offset and repayment provision applies to you. 

Mike has a big problem because an employee of the LTD carrier gave him incorrect information, as you can see from his email to me:

i was just approved for ssd after 3 years, i called my ltd insurer and told them i wanted to get thier money back i had gotten 38,000  i told my claim worker i had not heard from them so i was calling to find out what was going on, she told the paper work was in the mail then she said she could tell me how much i owed i said ok she told me 18,000 so i thought i was blessed.  i started paying back friends and family wo help me thru the 3 years and paid bills in the end i spent what i thought was my i have thier 18,000 but they want the 38,000 what can i do they told me wrong and by the time she called me back and said she told me wrongthe money was spent , i kept the phone call where she admits she told me wrong , what can i do give them the 18,000 and let them not pay me until it is sall paid back please help me, mike

 I think that Mike has an argument that the LTD representative entered into an oral contract with him to repay only $18,000.  I suspect that the policy itself has provisions that disclaim the right of any employee to modify the terms of the policy so the insurer will likely try to deny that the written policy terms have been changed.  The LTD carrier certainly has an argument that its repayment policy was in writing and agreed to in writing by Mike.

This might be a situation where Mike and the insurance company end up in arbitration (some of these policies contain a mandatory arbitration provision) or in court.  Perhaps Mike can enter into an agreement whereby he pays the $18,000 and then agrees to pay an additional sum – perhaps $8,000 or $9,000 over a two to three year period.

Mike might also want to contact his State's insurance commissioner to complain about unfair or misleading treatment.  My guess, however, is that at the end of the day the LTD carrier will likely play hardball.  Mike probably doesn't want to spend a lot of money hiring lawyers but that  may be his best bet – at least to get an opinion about what his policy says about resolving disputes and about the trend in the law in whatever court jurisdiction applies in this case.

Technorati Tags: LTD policy, LTD and SSDI offset, repayment of SSDI lump sum

Post from: Social Security Disability Blog

LTD Carrier Misleads Claimant About Repayment Obligation – What Next?