Many individuals in Chicago and all around America receiving long term disability insurance benefits wonder what happens after they have been approved for Social Security disability benefits. If you have applied for long term disability from your employer sponsored disability plan, the insurer probably told you that you need to apply for Social Security disability benefits. That is because under the terms of the insurance policy, once the insurer begins paying you, any benefits you obtain from the Social Security Administration will offset your insurance benefits dollar for dollar.
The first question people ask is whether or not they actually must apply for those Social Security benefits. The answer is usually yes. The insurance policies almost always require, as a condition for receiving long term disability insurance benefits, that you apply for Social Security disability benefits, and proceed through all levels of appeal of any denial. The next question people ask is why the insurer says they need to give the past due Social Security benefits to the insurer. If the long term disability insurer began paying you first, and the policy provides for the offset, the insurer is owed those previous overpayments. The final question people ask is what can the insurer do to recover that overpayment.
According to a recent case, Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083 (9th Cir. June 20, 2012), the insurer essentially had no recourse unless it was continuing to pay the claimant the benefits. The court prevented the insurer from being able to sue for the actual Social Security disability proceeds. However, the insurer would have been able to withhold future long term disability payments. The plan’s insurer, First Unum Life Insurance Company, terminated the benefit payments, though, so it was not able to enforce its purported right to the Social Security overpayment. Caution, though, that other courts have reached different decisions.
If you have questions about what you need to do when seeking or receiving long term disability insurance, contact an ERISA lawyer.