If you have long-term disability (LTD) insurance and you can't work because of a medical condition, you might be eligible for benefits to replace some of your lost income. Most group long-term disability policies—the kind your employer provides as part of your benefits package—are governed by the Employee Retirement Income Security Act, a federal law commonly known as ERISA. As a result, group long-term disability policies are often referred to as ERISA disability policies.
Here's what you need to know if you have or plan to enroll in an ERISA disability plan at your place of employment, including what to watch for when you file a long-term disability claim.
ERISA is a federal law intended to protect employees who participate in employer-provided long-term disability plans. ERISA disability regulations require your employer to provide you with your LTD policy's terms as well as detailed explanations of the following:
Note that ERISA disability insurance regulations don't apply to LTD plans provided by churches or government entities for their employees.
Here are ten important things to remember when you're considering filing an ERISA claim for long-term disability benefits.
Some ERISA long-term disability policies define the term so narrowly that you'll only be considered disabled if you can't perform the duties of any occupation. Other policies define disability as the inability to "substantially" perform your own occupation.
After you've been receiving benefits for a while (usually for 24 months), your policy's definition of disability could switch from the "own occupation" standard to the more strict "any occupation" standard. This change can result in your LTD benefits being terminated after two years.
Before applying for long-term disability benefits, check your ERISA disability policy's summary plan description for your insurer's definition of disability and other LTD requirements.
Most ERISA disability plans provide for an "elimination period" of 90 or 180 days when you're not yet eligible to receive benefits, even though you're disabled. This waiting period is often the same length of time that your short-term disability (STD) policy will pay benefits. You generally must use up all your sick time and STD benefits before you can file for LTD benefits.
Most group long-term disability policies, such as those provided by an employer, are paid for with pre-tax dollars, so you must pay taxes on the LTD benefits you receive. Expect federal, state, and local taxes to be withheld from your monthly payments.
By contrast, if you've purchased an individual LTD plan directly from an insurance company with your own after-tax dollars, your benefits will be tax-free.
Video surveillance is especially likely if you file an ERISA disability claim based on conditions like fibromyalgia, which aren't diagnosed using MRIs or x-rays. Undercover surveillance can consist of investigators doing any of the following:
Insurance investigators use undercover surveillance to find reasons for the insurance company to deny your claim. Be cautious in any interactions you have with anyone you think might be an investigator.
Most importantly, follow your doctor's orders regarding your physical limitations. For example, if your doctor tells you to avoid lifting more than ten pounds, don't carry heavy bags of groceries from your car to your house. You could injure yourself, and if you're under surveillance, you could hurt your disability claim too.
If you're getting long-term disability benefits and you're approved for Social Security disability insurance (SSDI), your long-term disability insurance company saves money. That's because, if you get SSDI benefits, the LTD insurer can withhold some of your monthly ERISA disability benefits to "offset" your monthly SSDI payment.
The offset gives your long-term disability insurer a big incentive to see you approved for Social Security benefits, which is why you're required to apply for SSDI. Some LTD companies will even arrange for a disability attorney to represent you in getting Social Security benefits.
Your insurance company or LTD plan administrator decides whether you're 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 long-term disability claim has been denied, your case isn't over. Every ERISA disability plan provides a method (and a deadline) for you to file an internal appeal of your denial.
If you exhaust your insurance company's internal appeals process without winning LTD benefits, you can file suit in federal court. But you won't be able to introduce any new evidence, because federal court judges decide ERISA disability cases on the "administrative record"—meaning the records that are already in your LTD file.
Consult an ERISA long-term disability lawyer if you have questions about filing an appeal in federal court.
How much you'll get in monthly long-term disability benefits depends on the specifics of your ERISA disability plan, but it's usually around 60% of your former salary. By contrast, short-term disability benefits often pay 80% or more of your earnings. Check your policy's summary plan description to learn how much you can expect in LTD benefits.
Learn more about how much long-term disability insurance pays.
Some long-term disability policies provide for benefits until retirement age, while others pay for a fixed number of years, usually five or ten. You'll need to check the summary plan description of your LTD policy to see how long you can receive long-term disability benefits.
How long you can get ERISA disability benefits could depend on the type of impairment you have. Many LTD plans limit benefits if your claim is based on a mental or nervous condition, such as:
It's not uncommon for LTD benefits based on mental conditions to be limited to 24 months.
Be sure to tell your doctor if you're considering filing a disability claim. Your insurance company will get copies of your recent medical records and send your doctor a packet of forms to complete. Your doctor's statement is crucial to the success of your long term disability claim, just as it is for your SSDI application.
Double-check that your file contains all the relevant medical evidence in your case. It's nearly impossible to add new medical evidence to the administrative record if you need to appeal your claim to federal court.
ERISA disability plans are a valuable part of your employer's benefits package. Having a long-term disability policy means your income is protected if you can't work for many months due to a disability.
But long-term disability claims can be challenging to navigate without an experienced attorney—especially if your insurance company acts in bad faith to deny you benefits. A long-term disability lawyer knows how to level the playing field when you're up against a large insurance company.
Updated February 13, 2023