One frequent question we receive when working with disability clients is: Can I return to work in some capacity and without risking (i.e., while still receiving) my long term disability (“LTD”) benefits? Many people are clearly disabled from their own occupation, but believe they can work in different, less demanding jobs or in their own occupation but on a part-time basis. They do not want to sit on the couch all day watching television. Rather, they want to feel useful; they want to contribute to society and, more importantly, to their family’s financial well-being. So, can LTD claimants continue to receive LTD benefits if they are also working? The answer to this question, like most questions in law, is “it depends.” Here, it will depend on the language contained in the long term disability policy.
To be clear, any return to work will raise a red flag with the insurance company, and likely trigger a more detailed review of the disability claim. How much of a red flag, and the degree of risk to the insured’s LTD benefits, will typically depend, in part, on at least three provisions in the insured’s policy: (1) the definition of “Disability;” (2) whether the policy permits claims for partial (often referred to as residual) disability; and (3) the date when disability benefits will end.
First, insureds should consider their LTD policy’s definition of disability. “Disability” or “Total Disability” is generally defined in one of three ways – each of which entails different degrees of risk when it comes to returning to work:
- An Own Occupation Definition of Disability only requires insureds to prove, for the life of their policies, that they are unable to perform the duties of the occupations in which they were engaged immediately prior to the onset of their disabilities. Assuming the insured’s plan to return to work in a completely different, less demanding occupation, this definition of disability likely carries the lowest risk to recovery of LTD benefits. For example, if, before the onset of a disability, the insured was a doctor specializing in orthopedic surgery, an insurance company may not over-scrutinize if the insured were to return to work as a real estate agent, depending, of course, on the nature of the disability.
- An Any Occupation Definition of Disability requires insureds to prove that they are unable to perform the material and substantial duties of all occupation for which they are qualified based on their age, education, training, and past work experience. For obvious reasons, this definition of disability carries the most risk if an insured plans a return to work. Looking at the LTD claim from the insurer’s point of view, if able to work in some capacity, an insured may no longer be considered “Disabled” under an Any Occupation Definition of Disability because the insured can actually perform some work. But, this is not necessarily a given. As discussed below, Long Term Disability policies may contain earning limits that allow claimants to work on a limited or part-time basis and still receive their disability benefits.
- A Combination of Own Occupation and Any Occupation Definitions of Disability carries a varying degree of risk. Here, the definition of disability will change after a certain period of time from being unable to perform the duties of the insured’s Own Occupation to being unable to perform the duties of Any Occupation. Generally, the “change in definition” will occur after 24 months – but we have seen policies where the definition of disability changes after 12, 60, or even 120 months. The degree of risk to LTD benefits is discussed above, and will depend on whether the insured’s return to work is before or after the “change in definition.”
Second, insureds should check to see if their LTD policies contain a Partial or Residual Disability provision – sometimes called a Return to Work Incentive or a Rehabilitative Employment. As the name suggests, Partial or Residual Disability provisions specifically allow an insured to work and earn a salary while still being considered disabled and entitled to monthly disability benefits (either the full LTD benefit or a reduced LTD benefit). If the LTD policy contains such a provision, there will be somewhat less of a risk to LTD benefits if the insured returns to work. But the ability to work while receiving disability benefits is not without its limits.
For example, there may be a limit on how much money an insured can earn while on disability. The LTD policy may define the term “Disability” as being unable to earn more than 60% of an insured’s Pre-Disability Earnings. In that case, an insured would no longer be considered “Disabled” and no longer entitled to disability benefits after returning to work in an occupation that earns over 60% of the insured’s prior earnings. And, the more they earn, and the closer they get to that 60% mark, the more an insured is putting the LTD benefits at risk. In addition, a return to work may effect the amount of recoverable LTD disability benefits regardless of how much the insured earns.
Third, whether or not the definition of “Disability” in a LTD policy contains an earnings limitation, an insured should review the policy provision discussing when disability benefits end. For instance, the long-term disability policy may specifically state that disability benefits end if the amount of money earned while disabled (i.e., “Disability Earnings”) exceeds 80% of the insured’s pre-disability earnings. And again, the closer the return to work earnings are to that 80%, the more of a red flag the insured will raise with the insurance company.
There are, of course, many other factors that will help determine whether, or to what extent, insureds are risking their Long Term Disability benefits by returning to work. For example: Does the treating doctor agree that the insured can return to work? Will the insured’s symptoms, restrictions, and limitations allow for full-time or part-time employment upon a return to work? Is the financial value of returning to work worth the risk to an insured’s LTD benefits. Given these considerations, we recommend you contact a disability insurance attorney for assistance if you are thinking about returning to work. The disability attorneys at Hiller, PC are here to help. Contact us today for a free consultation.
