Long-term disability (LTD) plans and Social Security Disability (SSDI) benefits are two important safety nets that are designed to help when someone suddenly becomes unable to work due to a disability.
However, the intersection between LTD benefits and SSDI can get confusing, especially because they are two very different benefits with very different rules. One question that frequently comes up is whether LTD benefits have to be repaid if SSDI is awarded. This can be particularly important to understand because most LTD benefits require recipients to apply for SSDI.
If you are awarded SSDI benefits, your LTD benefits may be offset
From the perspective of the Social Security Administration (SSA), it doesn’t matter if you receive long-term disability payments or not. However, it’s very likely that any LTD plan from a private insurer has an offset provision. That means that your LTD plan will be reduced, usually dollar-for-dollar, by whatever you eventually receive each month from SSDI.
But what about your Social Security Disability back pay? It can take months (or even years) to win approval for an SSDI claim because the criteria are so stringent. If you’re finally approved, you may be due a sizeable amount of back pay for the period you waited.
Does the offset provision by your LTD plan also apply to the SSDI backpay? It might. You may have to review the provisions of your LTD plan carefully to determine if you are subject to no repayment, partial repayment or full repayment.
If you do have to repay any of your LTD benefits out of your SSDI back pay, you also need to pay attention to which months payments actually overlap. SSDI can pay you up to 12 months of retroactive benefits prior to your application date, depending on when your disability onset date is fixed under SSA’s rules, plus the past-due benefits from the time your case began. If you didn’t receive LTD benefits for all those months, you don’t want to end up repaying any more than necessary.
It’s dangerous to assume you know how any LTD offset works given the stakes of the situation, and you cannot trust an insurer to guide you. If you have questions, it may be time to seek legal guidance.