One issue which comes up from time to time is the effect of pension benefits on your Long Term Disability benefits. Do pension benefits offset Long Term Disability insurance?
First, you can receive both as long as you are otherwise entitled to the benefits. The problem arises when the insurance company, such as Hartford, MetLife, Prudential, Cigna, Reliance, Reliance Standard, Mutual of Omaha, and others, try to reduce the amount of your Long Term Disability by the amount of pension benefits you receive. Whether they can do so involves the resolution of a number of issues.
How Can I Find Out If Pension Benefits Offset Long Term Disability Insurance?
The precise language of the governing Plan Documents (usually, the insurance policy) must be considered. Such language does vary from policy to policy but there are some basic consistencies. First, unlike Social Security Disability benefits, there is no right to offset pension benefits unless you actually receive them. With Social Security benefits, if you refuse to apply, the policy usually allows an estimate of those benefits to be deducted. Usually, the policies I have reviewed do not have language requiring an application for pension benefits and a concomitant right to estimate if you do not.
This is important in the following situation, which is not unusual. Hypothetically, let’s say you have a pension benefit that allows you the right to apply for an early pension at age 55 in which case
you would receive $1,000.00. Let’s say, further, that the pension plan provides if you wait until age 65 to apply, you would receive $1,500.00 per month. So, if the insurance could force you to apply and offset the benefits, you would get no benefit at all until age 65 because the money would reduce your Long Term Disability benefits by the $1,000.00 in pension benefits you now receive. Worse, when you turn age 65, you would be stuck with the $1,000.00 monthly pension payment.
So, the policy language must be carefully reviewed to see if they have (1) the right to the offset, and (2) whether they have the right to make you apply. On this subject, be careful about the behavior of your former employer who may try to force you into the pension even if you do not want to apply.
Please keep in mind that the topic in this blog is true pension benefits. If your pension payment is denominated by “disability pension” benefits, it would be hard to argue that there would be no offset. The issue in that situation might come down to the obligation to apply. This blog also does not relate to funds in your 401k or IRA accounts unless there is a lump sum transfer of a pension benefit. Of course, there may be other reasons to go ahead and apply for the early pension benefits which might trump the legal reasoning outlined above. Each case varies based on your circumstances, the specific nature of the benefit involved, and the language of the Long Term Disability policy.
The Attorneys at Herbert M. Hill, P.A. are Here to Help
If you have any questions about your Short Term Disability or Long Term Disability claim, please give Herbert M. Hill, P.A. a call. We counsel clients through the pension offset issue and any other issue which might arise in your claim. If you would like, after discussing your case, we can set a conference. In most circumstances, that conference would be free of charge but in no circumstance would you be under any obligation to hire me nor would you feel any pressure from me to do so.
