Disability Insurers, False Claims and Social Security Benefits

Here’s a story worth reading, about a case worth paying attention to, namely the pending First Circuit appeal - argued yesterday - concerning whether a long term disability insurer - namely Unum - engages in false claims when it instructs beneficiaries to also apply for Social Security disability benefits. Simply put, group long term disability plans routinely require participants applying for LTD benefits to also seek social security benefits, if they qualify, and the plans are structured so that the LTD benefits are off set by the amount of social security benefits received. The structure both reduces plan costs - thereby satisfying the overall goal behind ERISA itself of encouraging plan adoption - and ensures that plan participants receive - when they are entitled to them - benefits under a social security system they have been paying into for years. There is nothing wrong with this system, although in its implementation there will be circumstances in which the implementation and enforcement of the offset can have a negative short term impact on a plan participant, due to the reduction in LTD benefits from what was paid prior to the award of social security benefits. But it is a workable coordination of the two benefit systems, one that has been in place for many years. Whatever the merits of this particular case, its certainly one that presents a need to avoid tossing the baby out with the bath water, and derailing this long standing benefit plan structure.