What is LTD?

LTD stands for Long Term Disability benefits. Private employers and insurance companies, not Social Security, pay LTD. Many larger employers offer LTD through pension plans for their disabled employees. Individuals can also buy LTD insurance policies directly from insurance companies.

How LTD and Social Security Disability Interact

LTD plans always include an offset for Social Security disability benefits. This means the LTD amount reduces dollar for dollar by the initial amount of Social Security disability benefits. For example, if the LTD is $2,000 a month, the employer or insurance company will pay $2,000 a month as long as the disabled person receives no Social Security. However, if the disabled person starts receiving $1,500 per month from Social Security, the LTD drops to $500 per month.

Retroactive Benefits and Attorney Fees

If the disabled person receives retroactive benefits from Social Security for months they also received LTD, the employer or insurance company will want some of their money back. Employers or insurance companies usually give a credit for the attorney fees the disabled person paid for representation on their Social Security disability claim. In a way, the employer or insurance company pays the attorney fee.

Why Pursue a Social Security Disability Claim?

A person already receiving LTD may wonder why they should bother with a Social Security disability claim if it just reduces their LTD amount. Here are some reasons:

  • The Social Security disability benefit may be more than the LTD benefit.
  • Many LTD plans require that a person receiving LTD pursue a Social Security disability claim through an ALJ hearing. If the disabled person refuses, the LTD is cut off.
  • LTD benefits provided as an employee benefit are fully taxable. For most people, Social Security disability is not taxable at all. At worst, it is only partially taxable.
  • Generally, LTD plans do not include a cost of living adjustment. The benefits never increase even if the cost of living does. After ten or fifteen years, inflation erodes the LTD benefit. Social Security disability benefits, however, adjust for inflation and maintain their value. Since LTD plans generally offset only the initial amount of Social Security disability benefits and not the cost of living adjustments, the disabled person on Social Security has protection against inflation that a disabled person only on LTD does not enjoy. Note that the LTD plan for N.C. state employees does provide cost of living adjustments but also offsets Social Security’s cost of living adjustments.
  • Most LTD plans only pay benefits until age 65, leaving disabled persons to rely on Social Security retirement benefits thereafter. Anyone on Social Security disability based on their earnings receives an earnings “freeze” so that their Social Security retirement benefits do not end up being reduced. If a person is out of work for many years without being on Social Security disability benefits, their Social Security retirement benefits will be lowered.

Need Help?

If you’re in NC and want help with your Social Security disability claim, call Hall & Rouse, P.C. at 1-866-425-5347.