Do Social Security retirement benefits affect my Long-Term Disability payment?

A recent caller to the office – let’s call him Al – asked an interesting question.  Here is our exchange:

"Al, let me see if I understand your question correctly,” I asked. 

“You have been receiving long-term disability payments through an insurance plan and that LTD insurer reduced your benefits by the amount of your Social Security Disability.  Correct?”

Al said, “Yes.”

I continued, “Now that you have reached full Social Security Retirement age, your Social Security Disability is now Social Security Retirement.  And, you want to know if the LTD insurer can continue to offset the LTD benefit by what you now receive as Social Security Retirement. Correct?”

Al said, “Yes.”

“Great!” I exclaimed.  “I just like to make sure I am understanding what you are asking.”

“Al,” I said, “Here is my lawyer answer – I don’t know.”

How will Social Security benefits affect my Long-Term Disability Payment?

How and whether any Social Security Retirement payments affect your LTD payment will be a function of the specific language of your LTD policy.  And, each policy is slightly different.  You will need to obtain a copy of your policy and read specifically what it says about the receipt of any Social Security benefits. 

In most ERISA plans that I have reviewed, the LTD policy only pays benefits until you reach your Social Security Retirement age.  If this is the case, the effect of receiving full SS Retirement benefits will be that you are now aged off of the LTD benefit. 

In private LTD plans, the policy period varies, and how each policy handles offsets for SS Retirement differs.

If you have not aged out of your Long-Term Disability plan, usually any money you receive from Social Security will be offset (or deducted) from your Long-Term Disability payment. So, if you're receiving $2000 per month from LTD and receive $800 per month from Social Security, whether that be from Social Security Disability or early retirement Social Security benefits, your LTD disability payment will be offset by $800 to $1200 ($2000-$800=$1200) so the total amount you receive per month will remain the same ($2000).

So, as I told Al – “You need to get a copy of the policy and review it. And, if you don’t understand what you are reading or what you are looking for, give my office a call to schedule an appointment where we can review it together.”

Al set off to find a copy of his policy.  If you have this question, you should do the same!