Yearly Archives: 2014

Many employees are provided long term disability coverage under a benefit plan[1] which is governed by ERISA.[2]  Most of these plans provide that the employee will be paid 60% (although there are different percentages) of the monthly earnings if the employee satisfies the definition of disability in the plan.  While this 60% is prominently displayed in the schedule of benefits, it is only upon a reading of the plan that one is advised that the 60% amount is offset by other monetary payments[3] received by the employee because of the disability.

The typical offset found in almost every case is the payment under the U.S. Social Security Act.  Most plans require a claimant file for social security benefits or it will estimate the amount that will then be offset.

If an employee makes $48,000 a year or $4,000 monthly, the 60% gross benefit would be $2,400.  When social security payments are made, that amount would be offset from the $2,400 to arrive at the net benefit.  As an example only, if the claimant received $1,200 and the child/children received half of that or $600, the total payment from social security would be $1,800.  This would result in a net benefit of $600.  So in this example the claimant would receive $600 from the plan and $1,800 from social security (until the children reach a certain age).

In the circumstance where the net benefit is very small or is a negative number, the plan typically provides for a minimum net benefit of $100.

One can see that the 60% benefit in the schedule of benefits is misleading, at the very least.  If an employee did not plan on receiving the 60% benefit ($2,400) minus the social security benefit ($1,800) in case of disability, the employee may have over estimated the income they were to receive.  Therefore, the importance of the realization that the plan only pays a net benefit is in planning one’s financial well-being in case of a disability.

^[1]The terms employee welfare benefit plan and welfare plan mean any plan, fund, or program which was . . . established or maintained by an employer or by an employee organization . . . to the extent that such plan, fund, or program was established . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) [holiday benefits, among others] of this title (other than pensions on retirement or death, and insurance to provide such pensions).   29 U.S.C. § 1002(1) (emphasis supplied).

^[2]The Employee Retirement Income Security Act of 1974, P. L. 93-406 (“ERISA”), codified at 29 U.S.C. § 1001 et seq. and in other titles, is a “comprehensive and reticulated statute.” Pension Benefit Guaranty Corp., 116 U.S. 359, 361 (1980).

^[3]Some plans identify these payments as “deductible sources of income” or “other income.”  Typically these other payments are amounts received under worker’s compensation or similar act, employee’s retirement plan, state compulsory benefit law, U.S. Social Security Act and/or that received from a third-party responsible for causing the disability.

Making the decision to apply for and to go on disability is often very difficult when the condition causing the disability is not acute, that is does not require an immediate application for benefits as for example the result of an accident. When you consider this prospect, you need to have several things in order before initiating the claim process with the HR department of the employer.

First, you should make sure that the doctor(s) that are treating the disabling condition agree that you are disabled due to that condition. If possible have the doctor(s) record the symptoms in the medical records, and also recommend that you stop working and you apply for disability.

Second, you need to know the date that you will go on disability. This is not always an easy date to determine. Even if you have a disabling condition, you can struggle through day to day. You are disabled when you finally decide that today is the day that you can no longer do the material duties of your job. This day should be chosen in the context of the policy terms. For example, if there is a preexisting condition issue, one would not want to go on disability until that clause has been satisfied.

Third, you need to have the finances in order as the claim process could last anywhere between six months to more than two years before a decision is finally reached.

Fourth, you need to decide if legal representation is required. For the initial claim process, the less sophisticated you are about such things and the more devastating the disease/symptoms you have, the more you should consider hiring an experienced ERISA attorney. If you are experienced with administrative type procedures and the cause of disability is acute, such as an accident, the more you may think about handling the initial claim process by yourself. For the appeal of any initial denial, you should always consider seeking the help of an experienced ERISA attorney.

You should call a reputable attorney experience in ERISA claims and discuss this further. This attorney should be able to tell you about the company involved, the type of disability condition you have together with the anticipated difficulty in proving the disability, the likelihood that you will successfully navigate the initial claim process and the attorney fees that would be charged in that situation. From this discussion you should a have a better feel for whether you want to try to file the initial claim.