LTD And Social Security Disability

    Spoiler alert: This is going to be complicated -- but important.

 

    LTD stands for Long Term Disability benefits. LTD is not paid by Social Security, but by private employers and insurance companies. Many larger employers  have pension plans that provide LTD to their disabled employees. Individuals can also purchase LTD insurance policies directly from insurance companies.

    LTD plans always contain an offset for Social Security disability benefits. This means that the LTD is offset or reduced, dollar for dollar, by the initial amount of Social Security disability benefits. For instance, if the LTD is $2,000 a month, the employer or insurance company will pay $2,000 a month as long as the disabled person receives no Social Security. However, if the disabled person starts receiving $1,500 per month from Social Security, the LTD goes down to $500 per month. 

    If the disabled person receives retroactive or back benefits from Social Security for months in which they also received LTD, the employer or insurance company that paid the LTD will want some of their money back. 

    Virtually always, the employer or insurance company gives a credit for the attorney fees the disabled person paid for representation on their Social Security disability claim. In a backhanded way the employer or insurance company pays the attorney fee.

     A person who is already receiving LTD may wonder why they need to bother with a Social Security disability claim, if anything they get from Social Security just reduces the amount they get from LTD. Actually, there are a number of good reasons for a disabled person receiving LTD to go ahead with the Social Security disability claim:

• The Social Security disability benefit may be more than the LTD benefit;
• Many LTD plans specifically require that a person receiving LTD pursue a Social Security disability claim through an ALJ hearing. If the disabled person refuses to do this, the LTD  is cut off.
• LTD benefits provided as an employee benefit are fully taxable. For most people, Social Security disability is not taxable at all. At worst, it is only partially taxable.
• Generally, LTD plans do not contain a cost of living adjustment. The benefits never go up even if the cost of living does go up. After ten or fifteen years, the LTD benefit is worn away by inflation and the LTD check that started out looking so good starts to look puny. Social Security disability benefits, however, are adjusted for inflation and keep a constant value. Since LTD plans generally offset only the initial amount of Social Security disability benefits and not cost of living adjustments, the disabled person on Social Security has protection against inflation that a disabled person only on LTD does not enjoy. Note that the LTD plan for N.C. state employees does provide cost of living adjustments, but also offsets Social Security's cost of living adjustments.
• Most LTD plans only pay benefits to age 65, leaving disabled persons to rely upon Social Security retirement benefits thereafter. Anyone on Social Security disability  based upon their earnings receives an earnings "freeze" so that their Social Security retirement benefits do not end up being reduced. If a person is out of work for many years without being on Social Security disability benefits, their Social Security retirement benefits will be lowered.

If you're in NC and want help with your Social Security disability claim, call Hall & Rouse, P.C. at 1-866-425-5347