People who have to stop working due to health reasons sometimes have both a Social Security Disability claim and a Short Term Disability/Long Term Disability claim. These are separate disability programs – one is administered by the Social Security Administration, and the other usually administered by a private insurance company. It is possible to make claims under both programs at the same time. However, depending on the timing, if a person is approved under both programs, problems can arise which may result in an “overpayment.”
Most disability plans offered by employers contain a “deductible income” clause. This clause typically says that if you are receiving or eligible to receive Social Security Disability benefits, those benefits reduce the amount of your Short Term/Long Term benefits that the insurance company owes you. If your Social Security Disability claim is approved before your Short Term/Long Term claim, this rarely causes problems because the insurance company will only pay you the difference between what you receive from Social Security Disability and your Short Term/Long Term benefit.
However, things can be tricky if your Short Term/Long Term claim is approved before your Social Security Disability claim. If that happens, the insurance company might pay the full amount of the benefit without reducing for Social Security Disability benefits because you haven’t been awarded them yet. If your Social Security Disability claim is later approved, and back benefits are paid, the insurance company will likely claim that they have “overpaid” you and ask for that money back from you. Overpayment claims can be frightening.
If you have received both Social Security Disability benefits and Short Term/Long Term benefits, and an insurance company is demanding that you repay an overpayment, you should seek counsel before making that payment. In many cases, there are ways to extinguish the overpayment without having to write a check to the insurance company. If you find yourself in this situation, we are happy to discuss options with you.