If you are one of the many millions of Americans who works for someone else, your employer may provide you with a benefits package that includes an Employer-Sponsored Disability Plan. That employer-sponsored plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA), a federal statute.
In general, most of these plans pay you a monthly disability benefit of between 50% and 66% of your income, MINUS other disability benefits you may be entitled to such as Social Security Disability, Workers’ Compensation, and No-Fault, etc. At first glance, while an employer-sponsored long-term disability plan seems to cover you in the event of a disabling injury or illness, often they have specific restrictions and/or limitations. You should be aware of them.
First, the monthly benefit you will receive through an ERISA Long-term Disability Plan (LTD) is based solely on your base salary/income. Therefore, if you are a salesperson and you rely on commissions to make a living, you need to understand that your disability benefits ARE NOT based upon your total pay that includes these commissions. Rather, your disability benefit is a percentage of only your base pay. Tips are NOT considered part of your base pay, either. Too often, clients are disappointed at the amount of their benefits because they were not aware benefits are based on base pay.
Second, there is a waiting period, called the elimination period, between the time you stop working and are assessed to be disabled and the time you are eligible to begin receiving disability benefits. It varies, but generally this period is between 90 and 180 days.
Third, as I’ve said many times before, the insurance carrier is not your friend. Quite often, no matter your disability, the insurance carrier will deny your claim. However, that doesn’t mean it’s all over. Generally, you are entitled to an administrative appeal, meaning, you present your appeal to the insurance carrier or plan administrator. It is only after you’ve exhausted the administrative appeal process (which may differ among insurance carriers) that you may sue in court.
Fourth, pay attention to the details. You may obtain benefits, initially. But, some plans will change the definition of disability after a 24-month period. The plan may first specify that you are disabled relative to your job, and after 24-months may change that to disabled to do any job. The latter classification is more limiting and more difficult to prove. That means it is possible that after receiving disability benefits for two years, the insurance carrier may terminate those benefits if you cannot prove yourself unable to work in any occupation, not just your own.
Fifth, remember that offset! Most insurance carriers or plan administrators will compel you to apply for Social Security Disability for a good reason. If and when you are approved for Social Security Disability, they will offset your monthly Social Security Disability benefits against your Long-Term Disability benefits – the money THEY pay you. So, you can expect a decrease in your monthly LTD benefits once you’ve been approved for Social Security Disability benefits.
Navigating through this process can be confusing, frustrating, and a losing proposition if you don’t know what you’re doing or you don’t really understand your Long-Term Disability Plan. At The DeHaan Law Firm, disability is all we do. We offer a case assessment, free-of-charge, to see if you have a viable claim for disability.