Ten Things Employees Should Know About ERISA Disability Insurance Benefits

If you have a long-term disability (LTD) insurance policy and you're unable to work, you may be eligible for long-term disability benefits to replace some of your lost income.

By , J.D., University of Missouri School of Law

If you have a long-term disability (LTD) insurance policy and you're unable to work, you may be eligible for long-term disability benefits to replace some of your lost income. Most group LTD policies are governed by the Employee Retirement Income Security Act, a federal law commonly known as ERISA. As a result, LTD policies are often referred to as ERISA disability policies. Here are ten important things to remember when considering filing an ERISA claim.

1. Your LTD policy's precise definition of "disability" can make a big difference in your case. Some LTD policies define the term narrowly, so that you will be found disabled when you're unable to perform the duties of any occupation. Other policies define disability as the inability to "substantially" perform your own occupation. It's also possible that after you've received benefits (usually for 24 months), your policy's definition of disability will switch from the "own occupation" standard to the more strict "any occupation" standard. This can result in your LTD benefits being terminated after two years. If you're thinking of applying for LTD benefits, you should check your policy's summary plan description for your insurer's definition of disability and other LTD requirements.

2. There's a waiting period between the time you become disabled and when you're eligible to receive LTD benefits. Most LTD plans provide for an "elimination period" of 90 or 180 days during which you're not yet eligible to receive benefits even though you're disabled. This time period often coincides with the length of your short-term disability policy. LTD applicants generally must use up all their sick time and short-term disability benefits before they file for LTD benefits.

3. Whether your LTD benefits are taxable depends on the type of policy you have. Most group policies, such as those provided by an employer, are paid for with pre-tax dollars and are thus taxable to you. Expect federal, state, and local taxes to be withheld from your monthly payments. On the other hand, if you've purchased an individual plan with after-tax dollars, your benefits will be tax-free.

4. Insurance companies often hire investigators to conduct undercover surveillance of people applying for LTD benefits. Video surveillance is especially common in cases where a person is claiming to be disabled based on conditions like fibromyalgia, which aren't diagnosed using MRIs or x-rays. Undercover surveillance can consist of investigators staking out your house, following you on errands or to doctor's appointments, and filming you outside your home. The primary purpose of undercover surveillance is to find reasons to deny your claim, so be very skeptical of any interactions you have with people whom you suspect are investigators. Most importantly, follow your doctor's orders regarding your physical limitations. If your doctor tells you, for example, to avoid lifting more than ten pounds, do not carry heavy bags of groceries from your car to your house. You could injure yourself and, if you're under surveillance, hurt your disability claim too.

5. If you've been approved for LTD, you'll probably be required to file for Social Security Disability Insurance (SSDI) as well. If you're approved for SSDI, your LTD company is allowed to offset your monthly SSDI payment against your LTD benefits (paying you less in LTD benefits). Because your LTD insurance company has a big incentive to see you approved for Social Security benefits, it will usually require you to file for SSDI. Some LTD companies will even arrange for a disability attorney to represent you in getting Social Security benefits.

6. Your insurance company or LTD plan administrator decides whether you are approved or denied for benefits. Not surprisingly, this framework frequently results in the denial of claims that deserve to be approved. But remember: if your LTD claim has been denied, your case is not over. Every LTD policy provides a method (and a deadline) for you to file an internal appeal of your denial. Only when you've exhausted your insurance company's internal appeals process can you file a case in federal court. In federal court, the judge bases his or her decision only on the administrative record, which means that you generally cannot introduce new evidence of your disability. Consult an attorney who specializes in long-term disability for questions about filing an appeal in federal court.

7. If you are approved for LTD benefits, you'll receive a percentage of your former salary, not the entire amount. How much you'll receive in monthly LTD benefits depends upon the specifics of your plan, but it's usually around 60% of your former salary. Short-term disability benefits typically can pay 80% or more of your earnings. Check your policy's summary plan description for the precise figures in your case. For more information, read our article on how much LTD pays.

8. Some LTD policies provide for benefits until retirement age; others pay for a fixed number of years, usually five or ten. Check your policy's summary plan description before filing a claim to see how long you'll receive long-term disability benefits.

9. Most LTD policies limit payments for disabilities based on some mental and nervous conditions. If you're applying for LTD benefits based on a mental or nervous condition, such as depression, generalized anxiety disorder, or chronic fatigue syndrome, be aware that you may only be eligible for benefits for a limited amount of time, often 24 months.

10. Your doctor's opinion and your medical records are both critical in an LTD claim. Be sure to inform your doctor if you are considering filing a disability claim. Your insurance company will obtain your recent medical records and send your physician a packet of forms to complete, but you should double check that your file contains all the relevant medical evidence in your case. If you need to appeal your claim to federal court, it is nearly impossible to add new medical evidence to the administrative record.

Finally, remember that ERISA claims are difficult to navigate without an experienced attorney. This is especially true if your insurance company acts in bad faith to deny you benefits.

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