Some people who are receiving long term disability (LTD) benefits feel that they are able to return to some form of paid employment and that it would be better for them to be out working, even part-time, than sitting at home. But does returning to work put their entitlement to LTD benefits at risk?
If you are receiving LTD benefits and return to work, you may jeopardize your LTD benefits, especially if you earn as much as you were making before you became disabled. Even earning a substantial portion of your pre-disability income could result in the loss of your benefits.
The terms of your specific policy will determine whether you will be able to receive your full long-term disability benefits if you return to work. Generally speaking “Own Occupation” policies give greater freedom to work than “Any Occupation” policies.
Working Under an “Own Occupation” Policy
Own Occupation LTD policies usually define disability as the inability to perform the substantial and essential duties of the occupation you had at the time your disability started. For example, a police officer who becomes unable to perform the physically demanding activities associated with that position could be found disabled under an Own Occupation policy, even if he/she is able work in a less physically demanding position.
For those receiving LTD benefits under an Own Occupation policy, having part-time or even full-time work in a different job will usually not affect their entitlement to benefits. However, there may be a claw back of some of the benefits they receive or they may lose all of their benefits if their earnings reach a certain level.
Limits on the amount of LTD benefits
Many Own Occupation policies have terms limiting the amount of benefits a claimant can receive, such as the following:
During your Own Occupation period you can work in another occupation while meeting the Own Occupation definition of disability. However, you will no longer meet the definition of disability when your wages from another occupation meet or exceed 70% of your pre-disability earnings.
This clause means that the disabled police officer who is able to return to work in an office setting and earns 70% of his/her gross pre-disability salary will no longer be eligible for disability benefits.
Return to Work Incentives
Many LTD policies contain “Return to Work Incentives,” which provide that an insured cannot receive benefits and wages that total more than 100% of their pre-disability gross earnings. If your wages from a new job plus your monthly disability benefit exceed this maximum, your monthly benefit will be reduced until your combined wages and benefits equal your pre-disability gross earnings.
Under many Own Occupation policies, disabled individuals can work in another job without automatically losing all of their LTD benefits. If you are considering going back to work, it is essential that you carefully review the terms of your policy, or consult a lawyer with experience in disability insurance claims, to ensure that you continue to receive the maximum amount of long-term disability benefits that are available to you.
Working Under an “Any Occupation” LTD Policy
Any Occupation long-term disability policies provide disability benefits only for those who are unable to perform any occupation for which they are reasonably qualified based on their education, training, or experience. Most disability policies change from Own Occupation to Any Occupation after 24 months.
Once again the specifics of your plan will determine the extent to which you can return to work under an Any Occupation policy. Usually the more you earn in your new job, the more your LTD benefits will be reduced. However, if you earn less than 20% of your pre-disability income, it is likely that your disability benefit will be not be affected. However, it is also likely that earnings of 80% or more of your pre-disability income will result in the loss of your entire LTD benefit.
Partial Disability Payments
Most Any Occupation policies provide partial disability payments to someone capable of only part-time work. This allows them to return to part-time work while continuing to receive ongoing benefits. Income between 20% and 80% of your pre-disability income will usually reduce your LTD benefit in proportion to their earnings. You will be required to provide your LTD insurer with proof of your earnings and hours worked on a regular basis.
Rehabilitation Incentives
Finally, many Any Occupation policies offer rehabilitation incentives designed to help disabled individuals get back to work. These programs usually allow those who participate in approved rehabilitation or job-training programs to receive an extra 5% to 10% of their monthly LTD benefits without any claw back.
What to Do Before Returning to Work
If you are collecting long-term disability benefits and thinking about returning to work, be sure to read your long-term disability policy carefully in order to understand how working will affect the amount of your benefit. If you are uncertain about how returning to work will affect your disability benefits, consult a lawyer with experience in disability insurance claims.
This blog post was written by Edward (Ted) Masters, a member of the Disability Insurance Claims and Personal Injury teams. He can be reached at 613-566-2064 or at ted.masters@mannlawyers.com.
