California Long-Term Disability Frequently Asked Questions

The following information includes frequently asked long-term disability questions. The answers stated are general in nature and are not intended to apply to every disability or other insurance conflict situation. Each case is different and carries its own set of circumstances which must be taken into consideration by competent legal counsel. By contacting the Los Angeles, California, ERISA lawyers of Kantor & Kantor, you can receive a personal consultation regarding your specific legal claim.

What are Long-Term Disability Benefits?

Long-Term Disability ("LTD") benefits are payments to an individual to replace lost income in the event of an injury or sickness resulting in an inability to work. Unlike Workers' Compensation benefits, State Disability benefits, or Social Security Disability Income benefits, LTD benefits are not required by law, nor are they provided by the government. LTD benefits are paid under special insurance policies that have been privately purchased, either by the individual on his or her own behalf, or by the individual’s employer as part of an employment benefits package.

What is the primary difference between individual disability policies and group disability policies?

Individual disability policy premiums are based on the risk factors and other circumstances of the individual being covered. They are not usually related to employment, although employers may, under some circumstances, pay the premiums for a particular employee’s individual disability policy. Group disability policies are usually purchased by an employer as part of an employee benefits package. Group policies are also contracted by private clubs, associations, or other organizations and made available to their members. Group policy premiums are not based on the circumstances of the individual policyholder, but on the general health of the group to be covered.

Why is it important to determine whether or not a disability policy is individually purchased or employer-provided?

If the disability policy is an individual policy, an extensive array of legal remedies is typically available to the insured under state law. Perhaps the most significant of these is the potential for punitive damages against an insurer who is shown to have acted in “bad faith” in denying benefits.

Under ERISA, employer-provided disability policies are not subject to any remedies except those provided by ERISA. Specifically, they are not liable for punitive damages even when shown to have acted in “bad faith” in denying benefits. Obviously, this removes a significant motivating lever to compel carriers to respond to claims in good faith.

What is ERISA?

The federal Employee Retirement Income Security Act (ERISA) was enacted in order to regulate and protect employees' rights under employer-provided pension plans. In 1986, however, the U.S. Supreme Court decided that ERISA also governed employer-provided insurance benefits, including LTDs. ERISA does not apply to privately purchased individual disability policies.

How can I tell whether or not I have LTD Coverage?

The simple, one-word answer is: “ASK!!!”

If your employer provides you a "package" of insurance services, you may not even be aware whether LTD coverage is part of your benefits package. You or your attorney should send a certified letter to your employer, requesting a copy of the Summary Plan Description ("SPD") for all Benefit Plans provided by the employer. The Summary Plan Description must identify the Plan Administrator for the benefit program. Usually, the Plan Administrator will be your employer. Federal Law requires the Plan Administrator to provide this information within 30 days after your written request. Failure to supply the information within 30 days can subject the Plan Administrator to penalties of up to $110.00 a day. It is important to submit the request via certified mail as this will prevent the employer from denying receipt of the request.

What are some of the other employer provided benefits that may be coordinated with LTD benefits?

Many LTD policies, especially those sponsored by larger companies, provide for a continuation of other employee benefits while a claimant is disabled. It is important, when applying for or after your begin receiving LTD benefits, that you contact your employer to determine whether, in fact, there is a continuation of any of these other benefit programs during the disability period. Other benefits that may continue during the disability period may include health insurance, life and/or accidental death insurance and pension benefits.

1. Health Insurance:
   If your employer provides LTD benefits, it almost always also provides health insurance. Coverage can include medical, dental and/or vision benefits. Depending upon the specific employer's employment policies, an employee's health insurance may continue in one of two ways, either under the regular insurance program or under COBRA.
2. 1. Private Continuation Coverage. Many times, although a claimant has left employment due to disability, the employer will not terminate their employment status. In these instances, the employer may have a policy whereby it continues the claimant's health insurance under its regular coverage. If the employer has such a program, coverage is usually dependent upon either the claimant receiving LTD benefits under the employer's benefit Plan or under Social Security. Frequently, coverage under these circumstances is continued by the employer for only a specified period of months beyond the employee's initial date of disability.
   2. COBRA. Under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) an employee receiving group hospitalization coverage through his or her employment has the right to continue the group coverage in effect under some circumstances. Upon the occurrence of a "qualifying event" (usually a termination of employment or entitlement to Medicare), the employee may continue the coverage for an additional 18 months. In order to qualify for this, however, the employee must pay for the coverage at the same rate charged the employer, plus a nominal administrative fee. Additionally, if the claimant is found to be disabled by the Social Security Administration within 60 days from the date the COBRA coverage commenced and the claimant notifies the employer within the 18 month period of COBRA coverage that the claimant has been awarded Social Security Disability, the claimant is entitled to an additional 11 months of COBRA coverage. Of course, the expense of maintaining the coverage continues to be the claimant’s responsibility.
3. Life Insurance:
   Many employer sponsored life insurance programs permit continuing coverage during the time period the claimant remains disabled under an LTD program. Unlike medical continuation, life insurance programs usually provide for a waiver of premiums during the entire time the claimant is found disabled. It should be noted that continuation of this benefit is usually contingent upon a determination that the claimant is disabled under a LTD policy.
4. Pension Programs:
   Larger employers will often provide a continuation of work credits to an employee for each month he or she is found to be disabled under either the company's LTD program or the Social Security Administration. These work credits can amount to a substantial increase in your future pension benefits. It is important for you to find out whether your employer offers such programs, and, if so, whether you qualify for them.

How do Workers’ Compensation Benefits, Social Security Disability Benefits and Group Long-Term Disability Benefits relate to each other?

Although each of these systems is independent of the other, a Workers' Compensation claim and award can profoundly impact the LTD Plan benefit.

1. Offsets
   Although not generally known and understood by Plan members, the fact is that most group Plans offset any LTD benefits with other disability benefits, or even retirement benefits that are received by the claimant. Most Plans also give the insurer the right to offset "estimated benefits" to which the claimant would be entitled if his or her claim is ultimately approved. Thus, the LTD Plan has an incentive to assist claimants to obtain Workers' Compensation and Social Security benefits because the insurer's liability is reduced by any other benefits received by the claimant. In some instances, insurance carriers find themselves in the logically inconsistent position of urging that the claimant is disabled, for the purpose of qualifying for Social Security benefits and at the same time asserting that the claimant is not disabled, for the purpose of denying LTD benefits under the Plan.
2. Social Security Claims
   Often the LTD Plan will arrange for a third-party firm to handle the Social Security claim on behalf of the disabled claimant. There may be no attorney-client relationship with the third-party and any information divulged in the representation may ultimately be forwarded to the LTD Plan. Unfortunately, the medical proof of disability may not be forwarded to the Plan. In this way, the Plan retains the benefit of the Social Security offsets, usually in a substantial lump sum repayment, but may then later terminate or deny the LTD claim as lacking medical proof of disability.
3. Workers’ Compensation Settlements
   One of the most important aspects of the inter-relationship between Workers' Compensation and LTD claims occurs in the execution of a Release pertaining to a Workers' Compensation claim. A claimant's LTD benefits eligibility can be eliminated by a Workers' Compensation settlement that is not very carefully drafted. Also, the apportionment of the settlement can affect the right of the insurer to offset the full amount of the Workers' Compensation settlement against long term disability benefits.

Every LTD Plan is a separate insurance policy and contains different terms regarding the types of benefits that may be offset. Often a policy will offset only the portion of a Workers' Compensation award or settlement that is allocated to loss of income. Under those policies, it is important to structure a Workers' Compensation settlement to maximize the LTD benefits available. The policy itself must be examined to determine the impact of a Workers' Compensation award on the amount of benefits. Because of the significant risk of inadvertently compromising the LTD claim, it is important to involve an LTD claims attorney well in advance of settlement of any Workers’ Compensation claim. Competent disability counsel can assist you in ensuring the preservation of your LTD eligibility and in maximizing the amount of LTD benefits available.

Are LTD benefits taxable?

Your LTD benefits may or may not be taxable, depending on the circumstances. If you pay no premiums on the group policy, or pay premiums with before-tax dollars, the benefits are fully taxable as income. If the policy is a group policy on which you and your employer split the cost of the premiums, then you can only reduce your tax liability by the percentage of premiums paid. But if you pay premiums on your policy without contribution from your employer, and the premiums are paid for with after-tax dollars, the benefits you receive will not be taxable.

How much does Kantor & Kantor charge for legal representation in matters involving disability claims and other insurance conflicts?

There is never any charge for an initial consultation to determine how the Firm can best serve your needs. Many of the legal fees, especially those involving ERISA matters, are set by law, but in all events you will find the fee schedule at Kantor & Kantor to be very reasonable and competitive. There will be no “surprises,” and no hidden costs.

If you or someone you know in Los Angeles, California or within the surrounding cities and counties of California needs the assistance or trusted legal advice of an experienced long-term disability attorney, please contact Kantor & Kantor today at 1-866-435-3722, or complete the contact form provided on this site to begin your free consultation.