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great-newsSince so much attention is placed on earnings and income that by contract provision can be offset (subtracted) from private disability benefits, I thought an article on income NOT offset from benefits might be interesting.

Although most insurer provisions basically name the same items, let’s use Unum’s provision as an example. See blow.

WHAT ARE NOT DEDUCTIBLE SOURCES OF INCOME?

Unum will not subtract from your gross disability payment income you receive from, but not limited to, the following:

  • 401(k) Plans
  • Profit Sharing Plans
  • Thrift Plans
  • Tax Sheltered Annuities
  • Stock Ownership Plans
  • Non-Qualified Plans of Deferred Compensation
  • Pension Plans for Partners
  • Military Pension and Disability Income Plans
  • Credit Disability Insurance
  • Franchise Disability Income Plans
  • Retirement Plan from another Employer
  • Individual Retirement Accounts
  • Individual Disability Income Plans
  • No Fault Motor Vehicle Plans
  • Salary continuation or accumulated Sick Leave Plans

Although 401(k) plans are quickly disappearing from the workplace, when offered in combination with ERISA group disability Plans, future distribution funds are not offsets from disability benefits. This is great news for employees who can “defer” taxes on 401(k) contributions while still employed, but avoid offsets from benefits if disabilities occur requiring distribution of 401(k) retirement after the age of 55.

The worst possible option for employees is when employers have “qualified employer defined contribution plans” in place. Most private disability insurers offset under a provision that says something like, “Retirement benefits will be those benefits which are based on your employer’s contribution to the retirement Plan.”

Depending on contract or Plan language mistakes can be made by allowing insurers to offset “qualified defined benefit plans” when the exact language refers to defined employer contribution plans.

Profit sharing plans refers to a Simplified Employee Pension Plan (SEP) allowing extremely high contributions (25% of compensation or $54,000 in 2017). Only employers can contribute to SEP Plans, but as a general rule distributions from SEP plans are not offsets from disability income.

Thrift Plans (TSP), or Thrift Savings Plans are the 401(k) equivalent for federal employees. Those covered by ERISA Plans would have to be withdrawing TSP retirement funds from a prior employment with the federal government. TSP funds can be rolled over to a new employer’s Plan or IRA. In either case, TSP and IRA distributions are not reductions in private disability benefits.

An example of a tax-sheltered annuity (TSA) is the 403(b) plans offered by public schools and certain charities. Money can be deferred from salary into individual accounts.

Stock Ownership Plans (ESOP) are qualified defined contribution employee benefit Plans (ERISA) designed to allow employees to invest in the stock of the sponsoring employer. These are retirement plans wherein employees “own the company” for retirement purposes.

Non-qualified plans of deferred compensation as it relates to benefit offsets included things such as cashing in CDs, annuities, mutual funds, money market certificates and removing savings. You may not have thought about all that is relation to disability offsets, but everyone should be relieved that this income is excluded specifically in disability Plans.

Of course, a non-qualified  compensation plan can also refer to any Employer agreement to pay employees or independent contractors money earned in one period and paid in another.

Although only employers can set up pension plans, any retirement plan income from partner plans are not subtracted from benefit income. Military pension and disability income Plans are self-explanatory and are not deducted from private disability income.

Proceeds from credit disability insurance payments are also not offsets. Franchise disability income plans are retirement plans for small groups of employees – also  not an offset from disability benefits.

Retirement plan from another employer – Yes! Retirement plans from previous employers are not reductions from disability income. Income from previous employer plans should be separated from all plans existing from a current employer, including all paperwork proving where the money came from even if it was rolled over.

Income from IRA (Traditional or ROTH) are not offsets from benefits. This is another great option for those with Group LTD Disability Plans. IRA withdrawals may begin at age 59 1/2 without IRS penalty, nor are these distributions offset from LTD benefits.

Individual disability income plans, or policies you buy yourself separate from any employer are not offset when you receive benefits. This means what while you are also receiving group LTD benefits you may also receive DI benefits that are not offset on the group policy. Great news.  Those who can afford to buy DI insurance while still employed receive great advantage – DI benefits are not taxable and are not offsets from group Plans.

No-fault motor vehicle plans often called PIPs (Personal Injury Protection) are required by the following 15 states: AK, DE, FL, HI, KS, MD, MA, MI, MN, NJ, NY, ND, OR, PA and UT. Insureds can opt out of PIP insurance in WA and TX. PIP claims are those made against one’s own automobile insurer for medical bills and lost earnings “no fault” coverage.

Finally, most but not all group Plans include salary continuation and accumulated sick leave Plans on the “no offset” list. This becomes very important when severance contracts are issued and how employers define additional future income.

The purpose of this article is to give you a brief explanation as to what each “non-offset item” was as described in most group Plans. There is a great deal of additional information available on the Internet for each of the above items that will help you decide from a planning perspective as to the amount of income available to you in case of disability.

This article is probably of most importance to those receiving LTD benefits long-term and reaching retirement distribution age as well as those who are planning for the future and want to maximize disability income.

 

anonymousMost people who visit Lindanee’s Blog will later tell me how valuable and helpful the information was and that it helped them tremendously. In fact, I often receive “thank you” emails from those who have used the information to help them have successful claims.

In addition, not all, but some readers would love to comment but won’t do it because they want to remain ANONYMOUS. Others tell me they want to help others and change the system but want to remain ANONYMOUS.

While I respect anyone’s right to remain unnamed, let’s examine this for a minute. What would happen to Lindanee’s Blog if I had named it “The Anonymous Blog?” You wouldn’t know if the person writing the blog was creditable, and most people probably wouldn’t even pay attention to the content. Readers wouldn’t know anything about me, my experience, education, or diversity of background.

I’m also guessing that people looking for disability information probably wouldn’t even find my blog, and in the end thousands of yearly readers would not have the benefit of the information I offer here. Also, you have to admit, as some professionals have told me, “Linda you give away far too much information here for free.” Truth is, you wouldn’t believe a word I said if this blog was written by ANONYMOUS.

In order to change a long-time corrupt insurance system that today is essentially operating without regulation, thousands of people would need to come forward, off the proverbial ANONYMOUS fence, and petition state insurance departments to continuously engage in conduct market examinations that monetarily penalize insurers for wrongdoing.

Although in the past, the media was helpful in bringing UnumProvident to accountability we can probably forget mainstream media as an ally to force insurers into compliance with “fair and equitable review.”

But, if we witnessed anything at all in the election of 2016, it was the power of the people to bring about change. I can reasonably postulate that no change will ever bring about fair and equitable claim review for private disability insurers unless the people affected themselves offer protest, and not the ANONYMOUS kind either.

In the past, this Consultant spent close to $30,000 defending my right to educate the general public and provide information to insureds and claimants at least equal to that of the insurance companies who make claims decisions. I’ve never been ANONYMOUS, even in my whistle-blower days 16 years ago.

For many years I didn’t mind “fighting the good fight” for insureds and claimants all by myself, but admittedly, it’s a very lonely and expensive place. I never tried to hide my name even when I was secretly providing documents to many government and state agencies. Why did I do that? Because I wanted to change a very unfair system that allows insurance companies to deny claims for profit.

NCDI_Logo_colorAlthough I created a sister non-profit corporation, National Coalition of Disability Insureds, to give people a venue to come together to change a corrupt review system, everyone wanted to be ANONYMOUS. While I do keep this organization active, insureds and claimants really have no interest in supporting real change.

Let’s be honest, we all know that ANONYMOUS won’t cut it – I know it, the lawyers know it, and the insurance companies know it. I’m now content helping individual insureds and claimants, one claim at a time, and as I’ve indicated previously on my blog I do a good job with my consulting business and have consistently earned an excellent success rate of between 98-99%.

Still, every time I hear the word ANONYMOUS the literal hair stands up on the back of my neck, and I sadly admit to myself that as long as insureds and claimants are scared and fearful,  much needed changes will never take place.

Hiding under the ANONYMOUS rock never got anyone anywhere. I’ve always signed my name, signed my own affidavits, and have consistently been up front and out front with what I do. Honesty works!

Without assistance from the people who are genuinely affected by unfair insurance schemes, there will be no change.

(Out of respect for my readers who are ANONYMOUS, if you send me your comments by private email I will publish them on the blog ANONYMOUSLY.)

 

Scam alertGuardian has always been an “investigative overachiever”, but in its search to determine total disability vs. residual disability the company often interprets no earnings as “negative earnings”, which in my opinion is a misinterpretation of policy provisions and a breach of contract.

Insurers often have a vested interest in paying residual vs. total disability because the distinction could affect the amount and duration of future benefits by paying for shorter duration or not all, or limiting the time residual benefits can be paid.

In the case of Insured A who is performing her own occupation as a dentist part-time and not performing orthodonture, and receiving no income, it could be to Guardian’s advantage to determine payment should be made for “residual benefits” even when there are no earnings. And, this is a bit of a problem.

First, Guardian’s policies define “residual earnings” as “gainful part-time work.” Logic dictates that “no earnings” isn’t gainful. Therefore, also logically in order to pay “residual benefits” there must be gainful earnings.

A second problem arises when the residual computation outlined in the policy is calculated to determine what is owed. Guardian would need to input a $0 earnings figure, hence the result referred to as “negative earnings.” What this means to the insured is that a “negative earnings” figure most likely results in the payment of 100% of benefit representing no change to the insured in the present. BUT, if the policy limits or reduces “residual benefits” in the future, the insured could be penalized.

I can foresee Guardian saying to Insured A, “We’ve decided to pay you under the residual provisions of your policy, but don’t worry since you’ll still be paid 100% of your benefit.” Most insureds would agree without reading the remainder of their policy writing indicating a limited pay period for residual disability, or lesser benefit in the future.

In my opinion, in order to be paid under the residual provisions of a policy THERE MUST BE  GAINFUL EARNINGS. There is no such thing as negative earnings by policy definition. Insureds are recommended to read the residual provisions in their policies very carefully to determine “what happens” in the future when paid residually.

It just doesn’t make sense to pay insureds 100% of residual benefits when there are no earnings producing “negative income” in the computations. You must know there must be an otherwise advantageous profitability reason why Guardian would do such a thing.

Insureds who are working part-time, perhaps in their own businesses, but not receiving income are still totally disabled because they have at least a 20% earnings loss and are performing their occupations for less time than is normally required. Attorneys need to challenge this in the courts if they get a chance to do so.

This strategy borders on bad faith since it appears to be  a “pattern of business practice.”

Friday Q & A

Q&A4I heard there were “disability special handling units”. What if my claim is in Unum’s EDU?

All insurers maintain a special department to forward claims, at least in theory, the company has accepted liability for to maximum duration. Unum’s Extended Duration Unit (EDU) and Chattanooga’s SHU, Special Handling Unit are used for this purpose.

In the past, claims in the EDU/SHU were only updated every year or so and not much attention was paid to review and “risk management” claims for denial. While the EDU represented a type of “safety zone” for claimants, it is no longer viewed by Unum in that way.

Nearly 2 years ago, Unum’s best and finest claims handlers were sent to the EDU with a directive to deny claims. This is why so many claimants with Unum claims paid 10, 15, 20 years suddenly lost their benefits. At one point I heard rumors that Unum’s old CBA (Central Benefits Administration) had been resurrected in Worcester, MA – a place where claims awarded SSDI were sent. Prudential calls its special handling unit, the MCT, or Mature Claim Team.

Of course, we all know that SSDI award decisions are not considered by Unum in any way even though the company openly tells you it does. “Special Handling Units” are common and are necessary to prevent claims handlers’ blocks of claims from growing to unmanageable numbers. However, the fact that claims are sent to any one of these units does not guarantee claims will not be denied.

Who pays Social Security Taxes on LTD disability for Unum?

The Internal Revenue Service exempts long-term disability payment from wages in two separate cases.

  1. Workers’ Compensation benefits.
  2. LTD benefits paid after 6 full months. This rule is most often applied to self-insured Plans.

This means that LTD benefits are subject to FICA tax deductions for 6 full months. Employers must also continue to pay the Employer’s portion of FICA for the same period. Beginning in the 7th month LTD benefits are exempt from FICA taxes. LTD Contributory plans for which premiums are paid 100% by employees with after-tax dollars are also exempt from FICA taxes.

For those of you who are interested, in 2017 the FICA tax rate is 7.65% for both Employer and Employee. This is broken down, 6.2% for SS and 1.45% for Medicare. FICA taxes are deducted until gross wages reach $127,200, an increase of 7.3% over 2016. (Yes, wealthy people do not pay FICA tax after they’ve earned $127,200!) Therefore, the maximum amount employees pay for FICA taxes increased in 2017 to $7, 886.

Looking at the figures, it’s hard to imagine that the total liability for FICA is a whopping 15.30%. You may begin to understand why employer’s need a break. Having employees becomes very expensive when footing the bill for FICA taxes much less providing expensive health insurance. Self-employed businesses must pay both the Employer’s and Employee portions of FICA – also prohibitive to small business.

Is Sun Life disability insurance a rip off?

No more so than any other insurer’s policies or Plans. Sun Life Financial employs ex-Unum employees and lawyers therefore many of its unfair practices are similar to Unum’s. In my opinion, Sun Life over utilizes outside resources that are often sub-quality. Make no mistake, the company is an aggressive risk manager of disability claims. However, most insurers are doing many of the same things.

What percentage of STD claims are paid by Unum?

My guess is around 50%. Unum’s philosophy is to deny claims earlier in the STD/LTD process rather than later. This means Unum’s internal STD review process includes STD roundtables, triage, and other strategies designed to eliminate claims such as attempting to throw off liability to workers’ compensation.

There is clear evidence that Unum looks to deny STD claims as quickly as possible to avoid the more expensive LTD in the future.

 

ComplaintsDEBBIE of Riverside, CA on Jan. 5, 2017

I have been paying Cigna for Short/Long term disability for many years. They like their bill to be paid and even on time but when it comes time to pay on a claim Be aware you will probably not receive anything. I went out on short term disability due to a work injury. The Doctor put me on limited work status and my employer was unable to accommodate the restrictions, so I was put off of work. Cigna paid the claim after requiring me to do most of the legwork to collect the necessary documents. They paid me for 4 weeks on the claim. I went back to the MD and he said he was keeping me on limited duty because I was not ready to go back to work full time. This is when Cigna decided to stop paying me stating that I was able to work limited duty.

I explained to them that my work would not let me come back until I was at a non limited status. They said that this was not their problem. I had to put in appeal after appeal to no avail. I would call and the agent would say, “that should be covered. Go ahead and appeal,” and weeks later I would receive a letter stating it was denied and I did not have any appeals left. Later during this process I had to have surgery and was put off of work on total disability. I called Cigna and the agent said “oh yes we should cover that. Go ahead and put in a new claim.” I put in the new claim only to get a very angry Cigna representative calling to tell me I was not allowed to put in a new claim, even though the company advised me to do so.

This company tries to wear you down so you will just give up because they have frustrated you beyond your breaking point. I think to myself what if someone needed this claim to be paid to be able to eat and provide for their family. I pray that these folks that work at Cigna never have to go through this process and get denied by such uncaring workers or company. My Sister in Law had a Aflac plan and they paid for everything for her family.

(CIGNA is the one private disability insurer you may wonder why it is still allowed to exist. Paranoid to the max, this company won’t even give the last name of those who manage claims. I can see why the above claimant reached her maximum level of frustration because it has also been my experience that CIGNA’s claims handlers are always one beer short of a six-pack and have no idea what they are doing. CIGNA also calls treating physicians and if they don’t answer denies claims for “no contact” even though there is no “proof of claim” provision to have verbal conversations with physicians. In 2013, CIGNA was slapped with a multi-state settlement agreement, but like Unum, ignores it.

I’ve received several calls in the last week from CIGNA claimants and it isn’t good. In my opinion, this company should not be allowed to exist.)

Madeline of New Egypt, NJ on Dec. 17, 2016

Cigna’s process is extremely slow, stressful and exhausting and it seems as if they intentionally drag you along just to deny the claim. I have been out of work on disability since April 2016. I recently had to apply for Cigna’s long term disability. Three of my physicians have recommended and deemed me physically unable to return back to work. All of my physicians have provided completed forms in addition to office notes – (149 pgs.) However Cigna has denied the claim stated that my limitations should allow me to continue to work. I have not received any disability payment causing financial hardship.

Now that I am on long term medical leave, my employer requires that I pay my medical insurance which I am not able to because Cigna has held all disability payments. I fear that I will lose my medical coverage soon and will not be able to continue receiving medical treatment for my medical conditions. All of this waiting and their avoidance has caused financial hardship and additional stress and anxiety which are causing me additional health issues. They have left me with no other option but to hire an attorney. My treating physician are very annoyed with the fact that Cigna’s medical team can disregard their professional expertise and professional and personal experience with my medical conditions/treatment as their patient without ever seeing me.

Also Cigna’s web page statement regarding long term disability is very misleading to the consumer, “Cigna Long-Term Disability plans can pick up where Short-term Disability leaves off, with helping to ensure a continued flow of income if you can’t work for an extended period of time due to an illness or injury. You can pay bills and focus on getting well.” Cigna should be required to remove this false statement.

(False advertising in private disability is quite common. There isn’t much to say about an insurance company that does nothing right.)

Great JobIt’s good news for DCS, Inc.! Figures indicate overall 2016 99% success rates assisting insureds and claimants worth approximately $4M in financial claim reserve. Figures were compiled based on all claims managed for the year 2016 including new business with positive results.

Insureds and claimants were able to retain benefits with expert assistance in filling out claim forms, managing insurance investigations, medical review management,  and providing clients with electronic books and other resources written by Linda Nee.

Referrals to qualified attorneys resulted in additional successful claim lump-sum settlements for $2M in claim financial reserve. DCS refers settlement issues to experienced, reasonably priced attorneys who do a great job negotiating settlement claims, Unum in particular.

Over the last 25 years I’ve been able to develop expertise in the management of FMS, CFS, HIV and chronic pain claims. DCS currently has  over 90 clients currently receiving benefits, 50 of which are Unum related claims.

Expert claims assistance by a consultant with actual claims experience can mean the difference between claims paid or unpaid. Although there are never any guarantees of outcome, DCS’ success rate was phenomenal in 2016!

Kidding meRecently, I received an email from an attorney who suggested that at least in the courts Unum is seen as having “cleaned up its act” and no longer acts upon its conflict of interest of good faith and fair dealing vs. targeted profitability.

As a consultant who deals with Unum issues on a daily basis, I just don’t see it. But, in order to at least give Unum some consideration, let’s take a look at the concerns documented by the Multi-State Settlement Commissioners in 2004 and examine whether the company has “cleaned up its act”, or is just a “horse of a different color.”

The first concern expressed by the Multi-State Commissioners was that Unum’s claims process engaged in, “excessive reliance on in-house medical staff to support the denial, termination or reduction of benefits.” 

In order for Unum to have changed its medical review process the company should be showing evidences that considerable weight is now placed on the opinions of treating physicians such that when those opinions are in opposition to those of Unum’s internal reviewers, the company acts as a fiduciary and decides indeterminable issues in the claimants’ favor.  Is Unum doing that?

Of course not. In fact, Section B.3 c(i) of the RSA Amendments requires Unum to, “give significant weight to an attending physician’s opinion, if the AP is properly licensed and the claimed medical condition falls within the AP’s customary area of practice…”  Unum isn’t doing this either. Unum’s hierarchy of medical review continues to rely heavily on its own internal opinions, completely disregarding those of qualified treating physicians.

The second concern of the 48 commissioners was, “…unfair evaluation and interpretation of attending physician or independent medical examiner reports.”

Despite the fact that most mental health professionals are refusing to release actual psychotherapy notes, Unum continues to “snatch” key phrases from medical reports and patient notes favorable to itself while ignoring all else contained in the record.

Although Unum’s paper reviews attempt to create the illusion that its opinions are the only correct ones, the company’s internal reviews do not provide accurate assessments of impairment or functional capacity, but instead create a fabled account of restrictions that exactly matches management’s view of denial for business purposes. It is not coincidental that Unum’s internal reviews seem to exactly match management’s targets picked out for denial.

Next, the commissioners cited, “…failure to evaluate the totality of the claimant’s medical condition.” 

This concern of the commissioners addresses “co-morbidity” meaning consideration of the effect of more than one impairment on total disability. In theory, if insureds have A, B, and C wrong with them, their impairment for disability purposes is D, meaning the combined symptoms of all impairments should be considered as a “total body disability.”

For years, Unum ignored (and still does) the co-morbidity aspects that contribute to total disability. At one time the company had (while regulators were still watching) a “Co-Morbid Roundtable”, but quickly did away with it because it wasn’t profitable.

Unum’s internal medical reviews, RN walk-in accounts omit consideration of co-morbidity as one impairment after another is disregarded as “not restrictive.” Denial letters overwhelmingly document, “…your claim was reviewed by a Psychologist….an Internist, and a Board Certified Orthopedic physician…..” What Unum is doing is disregarding and omitting each diagnosis individually as a cause of disability. Co-morbidity remains unconsidered in Unum’s medical reviews.

Finally, the 48 state commissioners were also concerned with, “…an inappropriate burden placed on claimants to justify eligibility for benefits.” 

Doesn’t it seem as though no matter how much paperwork is sent to Unum in support of claim, it still isn’t enough? Your doctor keeps documenting the same things over and over again, but Unum won’t acknowledge total disability? Given the number of Unum letters and other file documentation I read, there are constant indications that both claimants and insureds are held to a higher accountability standard than Unum in locating and providing medical proof of claim.

So there it is…..does it appear to you that Unum has “cleaned up its act” and is reviewing claims fairly? Is there clear evidence of a change in philosophy, or claims process methodology? Are more claims being paid?

From where I’m sitting there has been no change, and my perspective is the same as the insured’s perspective, or point of view. Unum has always been very good at hiding its dirty laundry, but there is every indication, that in truth, the company just doesn’t “walk the talk.”

______________________________________________________________

Consulting ServicesDisability Claims Solutions, Inc. is a fee based, national consulting organization that provides expert claims management services to those with private insurance. I offer free initial consultation.

If you are interested in becoming a DCS client, please feel free to visit my website at: http://www.disabilityclaimssolutions.com

  • Telephone: (207) 793-4593
  • Fax: (207) 274-2331

Detailed information about DCS, Inc. can also be viewed on this blog by clicking the “Consulting Services” Tab from the Lindanee’s Blog Home Page.

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