Yesterday I met with a Social Security client who was already receiving long-term disability (LTD) benefits. Although she had already planned on applying for Social Security Disability, she mentioned that Hartford, her LTD carrier, was “making” her apply for the benefits as well.

They had in fact offered her a deal: she could take a reduced monthly LTD benefit from Hartford now, in anticipation of receiving Social Security. If she did this, she would not have to pay them back when she gets her Social Security back pay (assuming she wins her Social Security case). Or, she could decide to continue getting her full benefit from Hartford, and then immediately owe them for the difference between her Social Security back pay and what Hartford paid her over the time period she waited for benefits.

This was a 60-year-old woman with little in savings, trying to survive month-to-month on her LTD benefit. She is on dialysis and receives three four-hour treatments per week. If she reduced her LTD benefit, she would legitimately endanger her access to basic needs in the long waiting period for Social Security. On the other hand, what would be the point of applying for Social Security to have it essentially cancelled out by her LTD benefit?

Such situations come up regularly in any disability practice. Many long-term insurance policies contain a “Social Security offset” provision, which states that if you receive Social Security Disability Benefits, your LTD benefit will be reduced by the amount you receive from Social Security. Since LTD policies are contracts between the insurer and insured, these clauses are (regrettably) valid and enforceable.

Thus, unfortunately, my client did not have much of a choice. Her insurance policy compelled her to apply for Social Security Disability and for any benefits to reduce her LTD payment.

Insurers say that clauses like this allow them to keep premiums low. Viewed a different way, of course, why should the benefits need to be so inextricably tied? How is it fair to have the LTD benefit, which has been paid into independently through premiums for years, reduced by the Social Security benefit, which has been paid into by one’s taxes?

The answer: it is not fair. It is not easy to be found disabled in either an LTD or a Social Security Disability case. Such policies essentially punish those most deserving of benefits. Unfortunately, the problem cannot be addressed once the policy is purchased. Employers must be extremely careful in selecting LTD policies to protect their employees from clauses like the Social Security offset.

Ultimately, the best decision for my client was to get the full LTD benefit while waiting for Social Security Disability. That way she could afford the basics and try to save what she could, and would not be surprised at having to give up her SSD back pay in the future. However, the situation could have been avoided with a better choice in policy by her insurer.

If you are applying for long-term disability and are unsure if your policy contains such an offset clause, please call us. Our long-term disability attorneys can help you understand the contract and discuss your options with you. Policies vary on the type of offset and even whether you will have a Social Security Disability offset. We can help guide you through the process and make the right decisions for your unique situation.