Can You Work While On Long-Term Disability?

If you're caught working at another job while you're also collecting long-term disability benefits, you may be putting your future benefits at risk—especially if you're earning as much as you were making before you became disabled. Even if you're earning less than you used to make but your wages are still enough to constitute a "substantial portion" of your previous income, you may have trouble showing that you're still eligible for long-term disability.

What Happens If I'm Caught Working While on Long-Term Disability?

It depends on the specifics of your long-term disability policy. Generally speaking, people who are covered by "own occupation" policies have more leeway to work than people with "any occupation" policies. As the names suggest, "own occupation" (or "own occ") policies provide benefits to people who aren't able to work in their usual career path, while "any occupation" (or "any occ") policies limit benefits to people who aren't able to perform any kind of job at all.

Whether you'll continue to receive your full long-term disability benefits while you're working will be based in large part on whether you have an "own occupation" or "any occupation" policy. If you're not sure which type you have, read your policy's summary plan description or check with your claims handler.

Working Under an "Own Occupation" Long-Term Disability Policy

To qualify for benefits under an "own occ" policy, you'll typically need to show that you aren't able to perform the "substantial and material duties" of your chosen occupation due to medical reasons. For example, a firefighter who sustains a back injury that makes him unable to climb a ladder, carry a firehose, or lift a rescued person could be found disabled under an "own occ" policy, even though he could theoretically work in a less physically demanding profession.

People who are receiving payments under an "own occ" policy can generally work part-time or even full-time in a different profession while still receiving disability benefits. Some policies do include exceptions to this rule, however, so make sure you're familiar with your policy before you start working in a different occupation.

Limits on the Amount of Benefits You Can Receive

Some long-term disability insurers have begun inserting terms in their policies that limit the amount of benefits you can receive once your earnings pass a certain threshold. Here's an example of what these terms might look like as part of the disability plan:

To understand what this clause means, let's return to our disabled firefighter example. If the firefighter earned $100,000 per year as fire chief and is currently earning at least $80,000 per year selling cars, the firefighter will no longer be eligible for benefits—since his wages as a salesperson are at least 80% of his pre-disability wages as a firefighter.

Return to Work Incentives

In a similar vein, many long-term disability policies contain "Return to Work Incentives," which state that your total amount of benefits and wages can't exceed more than 100% of your pre-disability earnings. If your wages and monthly disability benefit combined are more than what you previously earned at work, your insurer will reduce your disability payment until your total monthly income equals your pre-disability earnings.

Some policies only reduce your benefit in this "dollar-for-dollar" manner during the first 12 months that you're disabled. Check your policy to determine the degree to which your benefits may be reduced after those 12 months are up.

Provisions for Professional Services

Other policies contain additional restrictions that limit the ability of people who perform "professional services" to work while collecting long-term disability. Professional services include a wide range of occupations, but are mostly concentrated in the legal and medical fields. They tend to be "white-collar" jobs that require specialized licensing. Here's an example of a professional services clause in a disability policy:

Under this provision, your own occupation will be defined as any job requiring your same license. In theory, this could allow an insurance company to deny benefits from an "own-occ" policy to a surgeon who develops a hand tremor if the insurer can demonstrate that they could perform any other job requiring a medical license, such as a medical school professor. You should keep this in mind if you're considering returning to work in a position similar to your previous one.

The bottom line is that under many "own occ" policies, you can be disabled and work in another profession without affecting your long-term disability benefits too much. If you're considering going back to work, review the terms of your policy or consult with an attorney to ensure that you continue to receive the full amount of your disability benefits without interruption.

Working Part-Time Under an "Any Occupation" Long-Term Disability Policy

"Any occupation" (or "any occ") policies provide disability benefits for those who become unable to perform any occupation for which they are reasonably suited based on their education, training, and experience. Many long-term disability policies transition from "own occ" to the less generous "any occ" standard after a period of 24 months.

How Many Hours Can You Work With an "Any Occ" Disability Policy?

Many "any occ" policies provide for partial disability payments, which allow you to work part-time and still receive benefits. Typically, the more you're earning in your new job, the more your benefits will be reduced. A general rule of thumb for receiving partial disability benefits is as follows:

• If you're earning less than 20% of your pre-disability income, your payments will likely be unaffected.
• If you're earning between 20% and 80% of your pre-disability income, your insurance payments will likely be reduced in proportion to your income.
• If you're earning 80% or more of your pre-disability income, your insurer could terminate your benefits entirely.

Because hourly wages vary widely, you'll likely have to do the math to determine how many hours you can work before your income will start to affect your disability payments. While you're working, you'll be expected to provide your disability insurer with proof of your earnings and hours worked on a monthly basis.

Your particular long-term disability policy may offer "rehabilitation incentives" to help you get back to work. Such incentives can allow you to receive an extra 5%-10% of your monthly benefits, provided you participate in an approved rehabilitation or job-training program.

Am I Still Employed While On Long-Term Disability?

The purpose of private long-term disability insurance isn't to protect your job. Rather, it's designed to offer you a measure of income security while you're unable to work. Simply having a long-term disability policy doesn't guarantee that you'll have your job back when you're ready.

But laws such as the Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA) do restrict employers from firing you in certain circumstances when your medical condition keeps you from working. For example, if you qualify for FMLA leave—which is often taken at the same time as long-term disability—your employer is required to give you your old job back (or one that's nearly the same) once you've returned from leave. Employers who violate your FMLA or ADA rights leave themselves open to lawsuits.

Can You Work While On Permanent Disability?

It depends what you mean by "permanent." Most long-term disability policies have a defined term where you're covered, but after that period (typically several years) ends, you can no longer receive benefits. If you're still unable to work after your insurance policy ended, you may qualify for Social Security disability. Social Security doesn't offer temporary or partial disability benefits, so they expect that most people who qualify aren't going to return to the workforce before they hit full retirement age. But because some do, the agency has many rules about when you can work and also receive disability payments.

If you were injured on the job and qualify for workers' compensation, you may encounter terms such as "temporary total disability" and "permanent partial disability." Depending on your workers' compensation claim, you might be able to recover part of your income while also working part-time or on modified duty.

What to Do If You're Claiming Disability While Working

Working while claiming long-term disability benefits isn't automatically going to land you in trouble, but it can make things more complicated in the long run—especially if you're also thinking about filing for Social Security or workers' compensation. You may want to go over your options with an experienced disability attorney before you make your next move. If you're not sure whether you want legal assistance, check out our articles on hiring a long-term disability attorney, workers' comp lawyer, or Social Security claimants' representative.