The short answer: Yes.
It’s called an “offset.” Payments from a long-term disability policy can (and very likely will) be reduced by the amount you receive from Social Security. This is true whether you receive SSI or SSDI. The Herren Law Firm understands the process and can help you manage your claim and get you the benefits you deserve.
What’s The Difference Between Disability Payments And Social Security Payments?
Long-term disability is private insurance that you either purchase yourself or receive as a benefit through your employer. Disability payments provide income while you are disabled and are unable to work for a long time. Long-term disability provides a portion of your income (usually 50% to 65%, depending on the policy) while you are disabled. This insurance starts when short-term disability ends, usually after three to six months.
SSDI (Social Security Disability Insurance) and SSI (Supplemental Security Income) are government-funded programs that provide income when you are unable to work due to a disability. You pay into the system with the Social Security deductions from your paycheck.
What Is “Disabled?”
Generally, it means that you are unable to work at your regular job; “long term” is more than 30 or 120 days. You must be able to prove that you are medically and physically unable to work for an extended period of time. Your policy may specify that you must be unable to work the job you were in, or if you are unable to work any job, full or part time. Review your individual policy to find out about disability payments and more.
Disability criteria differs for insurance companies and Social Security, which is much more stringent. The Herren Law Firm can help you apply for Social Security benefits, and increase your chances of approval.
The Offset
When you file your Social Security claim, your benefit payments will take a very long time. However, the date your first file is your date of disability. Individuals frequently receive a lump sum for the period before their regular benefits begin, called a “backpay.” The insurance company may require you to refund some of the payments they previously paid to you using the backpay, to offset the monies already paid.
How It Works
Some long-term disability policies will require you to apply for Social Security when your insurance payments begin. Once it’s approved, your disability plan will pay you the difference between your Social Security payment and your policy payment. That is, if your policy payment is $2,000 a month, and Social Security is $1,500, your policy payment will change to $500 instead of the entire $2,000. The “offset” is the $1,500 per month that Social Security pays you, and your total income remains the same.
Backpay Is Taxable
Even if you are required to make a large, lump-sum payment to refund your insurance company, the IRS will also collect taxes on the lump sum. Many individuals are shocked to receive a tax bill for that amount, and may be unable to pay it. If you expect to receive a lump sum from Social Security, consider saving a small monthly amount from your disability payments to protect yourself against an unpleasant surprise later.
Long-Term Disability or Social Security? Or Both?
It depends on the insurance policy you have, and how long you may be disabled. Individually purchased disability insurance may allow both without offsets, whereas group or employer policies may have more restrictions. Some policies may require you to apply for Social Security once the insurance payments start.
Reading and understanding your individual policy is essential before starting and submitting a claim, so that you understand what you can expect, and if there is an offset once you receive your benefits.
The Herren Law Firm Is Ready To Help
Applying for Social Security for disability is a long process, and most claims are denied at the outset, requiring appeals. This is where you may need an attorney to handle your claim so you can start receiving benefits. If your insurance company is denying your claim, an attorney can step in and get the process moving again.
We’ve helped over 4,000 Houstonians just like you get the disability benefits they need. Call us today at (713) 682-8194 or (800) 529-7707 to schedule your free consultation. Our contingency fee arrangement means you only pay us if we win your case.