By Phillip A. Tatlow
In ERISA long term disability (LTD) benefits plans, frequently there are clauses within the plan entitled "Coordination of benefits or deductible sources of income." This type of provision in a plan allows the ERISA plan to reduce the monthly long term disability benefits of a plan participant with other deductible sources of income that are described in the plan. The LTD insurance carrier will seek information from the insured about whether or not they are receiving other sources of income, such as Social Security disability benefits, worker's compensation benefits, other LTD benefits or retirement benefits, in order to reduce the amounts that the Long Term disability plan has to pay to the plan participant/disabled person. It is important for the plan participant and her attorney to know how the LTD plan works at the beginning of the claim, so that the participant and the attorney are not exposed to legal liablity for failure to repay the plan if multiple benefits are recieved due to the person being permanently and totally disabled. Sometimes, a person will be disabled under the LTD plan, under Social Security and under worker's compensation and eligible for three sets of benefits. However, the coordination of benefits clause must be referred to in order to determine whether the LTD plan is entitled to any repayment.
Phil Tatlow recently spoke to a large group of attorneys on this issue in a seminar entitled, "8th Circuit Social Security Disablity Conference: The Interplay between ERISA and Social Security Disablity." In that seminar, he presented a number of topics, but one section was designed to educate fellow attorneys across a five-state area about this topic. He was helping teach other attorneys how the receipt of Social Security benefits and Long Term Disablity benefits could create an overpayment from the disability carrier and what to do in such cases. In these types of cases, the LTD insurance carrier will often seek a repayment of the funds from a participant that received both LTD benefits and Social Security or worker's compensation benefits. If the person will not repay the LTD carrier, this can cause the plan to either cut off future benefits in full, or even sue the participant to try and recover such payments. It is important to gather the ERISA plan documents early to identify whether or not the LTD plan has a coordination of benefits section or a section in the plan describing other deductible sources of income. If the plan has such a provision, the attorney for the Social Security case must be aware of this and know how to apply it to the case in order to protect the disabled client. If the plan is allowed to subtract the amounts received from Social Security from the amounts received from the ERISA LTD payments, the LTD carrier must be protected. This sort of a clause has been enforced in cases around the Country. Therefore, it is important to identify this early so the individual does not receive the Social Security back pay award and spend it all before repayment of the LTD plan. Otherwise the plan may sue the individual or cut off future benefits in full.