If you are receiving long term disability benefits, you can be certain that your LTD carrier will require you to file for Social Security disability. What is the practical effect of pursuing Social Security disability and how should you handle the insurance company’s request.

Most of the LTD policies I see are company provided. These company sponsored policies are sometimes called “ERISA policies” because the rules that govern how they are administered are set out in a federal law called the Employee Retirement Income Security Act of 1974 (ERISA).

If you worked for a company that gave you the option of purchasing short term and long term insurance as a payroll deduction, you almost certainly have an ERISA policy.

Under the terms of your ERISA policy you are required to apply for Social Security disability if your LTD claim is approved. Why? Because the insurance company has the right to offset what it pays you by what you receive from Social Security.

Here is an example – let’s say that your LTD policy pays you $2,500 per month if you meet the insurance company’s definition of disability. If your Social Security disability benefit is $2,000 per month, then the insurance company will reduce what it pays you to $500 per month since SSA is paying $2,000.

Your monthly payment remains at $2,500 per month but it will come from two sources instead of one. Continue reading →