Recently I’ve noticed an increase in the number of inquiries and posts about SSDI overpayments – in particular Unum harassing insureds to recover. This post applies to ALL insurers, not just Unum, who manage ERISA employer-provided plans which provide for offsets of benefits. Although I’ve written many good articles and posts on the subject it is an important issue and should perhaps be addressed on a periodic basis.
A recent post to one of my articles on the subject is below:
“I too am being harrassed to pay Unum the $34,000 from Social Securiy in a lump sum payment they sent me. How can they claim this money is theirs? They continually refer to it as an “overpayment”!! They were paying me $5000.00/month but stopped with about 6 months left on my 2 year disability plan presumably because SS disability gave me approval. However, at considerably less than $5000 per month. $4,200/month is quite a paycut! What are my viable options other than hiring an attorney? If I continue to ignore them, what is likely to happen with Unum?”
Unum, or any other disability insurer, can demand to be repaid in a lump sum any overpayment of benefits when there are policy provisions allowing the company to “offset”, or reduce, monthly benefits by the amount of any SSDI award. In short, if the policy says they can, then they can.
“Overpayments” per se exist because SSA pays benefits for the same time period you received an UNREDUCED, monthly benefit, therefore, you do owe the money back when you receive it from SSA.
To make matters worse, Unum for example, has what is called a Payment Option Form which asks claimants to make a choice as to whether they want an estimate for SSDI taken from the benefit while SSA is pending, or whether they want the company to pay unreduced benefits.
Most claimants choose to be paid 100% of the benefit while SSDI is pending and actually sign the form agreeing to pay it back. The Payment Option Form could be construed as a separate contract between the claimant and the insurance company. If you sign the Payment Option Form agreeing to receive unreduced benefits and then pay back any overpayment when you do get paid, then you owe the money back.
The real lesson in all this is that claimants with STD/LTD ERISA Employer Plans need to read their policies as soon as they becomes effective and understand very clearly what rights they have and what rights the insurance company has to reduce benefits. Can insurers reduce your monthly benefit for SSDI awards made to dependent children? YES! Most LTD policies now contain provisions which allow for offsets of awards to dependent children.
All disability LTD policies contain provisions which talk about the reduction of monthly benefits for “Other Monthly Income” of which SSDI is only one. Worker’s Comp awards, third-party automobile disability payments and some retirement income are also offsets from monthly benefits.
Claimants need to read their policies and clearly understand what net income they are entitled to long before disability occurs and make financial provisions, or at least have what I call a Plan B, so that families will have enough money to live on (or know where the resources are) when the insurance company deducts the SSDI awards.
Morally, should insurance companies be allowed to reduce monthly benefits by Primary and Family SSDI Awards, in my opinion – no. But, federal and state authorities are sending a clear message that under no circumstances will the middle class be allowed to make a profit on being disabled.
Or to put it another way, bring in more money with disability payments than if the person were working. It is possible to make a profit on disability when a claimant receives 100% of their monthly benefit AND SSDI and dependent awards. Why would anyone want to go back to work?
To my knowledge some attorneys have tried to challenge disability SSDI offsets in the courts and they have not been successful. In general, if you have an LTD policy containing an offset provision for Primary and Family SSDI, then a reduction of benefits is permitted and potentially an overpayment of benefits can occur if you elect to receive unreduced benefits on the Payment Option Form. If you agree to pay back the money, Unum and other companies can bring legal action to make you pay it back.
Please…the best advice I can give on this subject is that claimants should read their policies as soon as they become eligible for coverage and understand clearly how much net money they will be allowed to keep under the policy. With the offsets, it is generally 60% of pre-disability earnings regardless of the source.
I hope this information helps, but if you have further questions, please feel free to contact me. DCS does provide our clients with specific options and suggestions for handling SSDI awards and repayments.