Coordination of Disability Benefits

[cf59673]

I live in California and have recently applied for disability benefits due to an AIDS diagnosis.

My employer's LTD plan covers 60% of salary, coordinated with social security disability and "any other group disability insurance."

I purchased group disability insurance through a professional society about a decade ago, when I was self-employed, long before I started working for my currrent employer. I have been making premium payments myself independent of my employer's LTD plan. I have filed claims under both policies.

Can my employer's LTD policy coordinate with my private disability income policy, just because it is also a group plan and not an individual disability income policy ? I thought if I had my own policy, independent of my employer's policy, that the benefits would add and not be coordinated.

 

[ALawyer]

You raise an interesting question, and I'd have to read both of the actual policies to determine the answer, and then look up the CA law on the subject.

The legitimate purpose of limiting total disability benefits -- and thus of compelling coordination with other sources of disability income -- is to avoid giving people the opportunity to make near as much or more money from disability insurance as they earned at the job, as very often those with a motivation to stop working happen to claim a disability. That's sound underwriting.

Here, where the underlying cause of the disability is not really questionable, if the benefit that your employer's plan offers is fixed for the entire workforce (or was it? - did YOU have an election as to the extent of disability benefits you could register for, perhaps as part of a flexible or cafeteria plan?) there appears to be no policy reason why the employer's plan or carrier should benefit from YOUR privately purchased insurance. Also, as private insurance benefits are received income tax free, and employer provided disability benefits are taxable as income, you'd be doubly hurt. You'd thus want to collect on your private insurance first, than the employer's....

clearly unrelated to the

 

[cf59673]

There are no coordination of benefit phrases in my private insurance policy. The relevant phrases of the employer's plan are:

"BENEFIT AMOUNT: To figure the benefit amount payable:
(1) multiply an insured's Covered Monthly Earnings by the benefit percentage(s) as shown on the benefits page (it is listed at 60%, I'm paid on a W2)
(2) take the lesser of the amount:
(a) of step (1) above; or
(b) the Maximum monthly Monthly Benefit, as shown on the schedule...(it is $7500/month) ; and
(c) subtract Other Income Benefits, as shown below, from step (2) above.
OTHER INCOME BENEFITS: Other income benefits are benefits from the same Total Disability for Monthly Benefit payable under this Policy. The other income benefits are:
(a) disability income benefits an insured is eligible to receive under any group insurance plan(s);
(b), (c), (d) ...SSDI, gov retirement systems, workers compensation, etc. clauses.
Disability and earlyRetirement Benefits will be offset only if such benefits are elected by the insured and do not reduce the amount of his/her accrued normal Retirement Benefits when funded."

The benefit is fixed for the entire workplace, no elective coverage or cafeteria style plans. When first employed, I requested to pay the LTD premiums with my after-tax dollers, but the employer refused. I have been working for this company for over 4 years; I was diagnosed with AIDS 7 years ago but tried to continue with my life and career despite my illness. Progression of my illness makes that now infeasible.

Does this mean that any association or group plan that I might purchase independently, pay the premiums myself, may actually benefit another insurance company, in lieu of myself, because they include such a clause in their policy ?

I haven't yet heard from the insurance company about their position on this issue.