Can Your Long-Term Disability Insurance Company Take Your SSDI Back Pay?

On average, new applicants for Social Security Disability Insurance (SSDI) benefits will wait around 225 days or about seven months to receive a decision regarding their initial application.

If they are denied at this stage (and in Illinois nearly 70% of people are turned down for disability benefits at least once), they may wait several more months for an appeals hearing and a decision from an administrative law judge.

As a result, many disability recipients are owed back pay in addition to their monthly benefits. Simply stated, back pay is what it sounds like—a lump sum of money due to you, covering a period in which you were medically qualified for disability benefits but had not yet been approved to collect them.

After a long-fought battle to win disability benefits, most beneficiaries are surprised to learn that if they received disability benefits from a private, long-term disability (LTD) insurance policy, their back pay could create an overpayment situation.

The LTD company may have been paying you the full LTD amount for a stretch of time also covered by retroactive SSDI benefits, and the LTD company will likely demand that you reimburse them for overpayment.

Most long-term disability policies have a provision that allows the insurance company to recover any overpayment. This is known as an “offset provision” that allows the insurer to “claw back” the overpayment.

Let’s look at an example:

You sustained a disabling injury at work and were receiving $3,000 per month from a long-term disability policy provided by your employer. After 10 months you were approved for SSDI and awarded $2,000 per month, so your back pay for the 10 months is $20,000. Because of the offset provision in your LTD policy, the insurance company would argue that you were “overpaid” $1,000 for each of those 10 months since it should have reduced your LTD payments by the amount you were entitled to receive from SSDI. The insurer would then require you to repay the $10,000 in overpaid benefits.

Depending on individual circumstances, the LTD insurance company may demand a lump sum repayment, reduce future LTD payments until the overpayment is recovered, or suspend your LTD benefits until the overpayment is repaid.

If you are covered by an LTD policy, it’s crucial to carefully review it to understand how it handles SSDI benefits and back pay.

If you are unsure about your obligations or how to handle the situation, it’s advisable to consult with a disability attorney focusing on benefits claims.

“But the bottom line is that no SSDI attorney or law firm can change the provisions of your LTD policy,” says Nash Disability Law attorney Demetra Geller.

Back pay and long-term disability insurance is just one of the many complex legal areas of the Social Security Disability process that requires the expertise of people who understand all the ins and outs of SSA’s often log-jammed system.

You don’t need to use the “advocate” that your insurance company suggests. This may be a large, national company with non-attorney representatives.

For expert guidance and vigorous legal representation, turn to the experienced Chicago disability attorneys and staff at Nash Disability Law. Contact us for a FREE evaluation of your specific situation.