If you're collecting long-term disability (LTD) benefits and wish to return to work, you could be putting your LTD benefits in jeopardy, especially if you'll earn as much as you were making before you became disabled, or even a substantial portion of your pre-disability wages.
Whether you'll continue to receive your full long-term disability benefits depends on the specifics of your LTD policy, but as a general rule, those with "own occupation" policies are usually given greater freedom to work than those with "any occupation" policies. Read your policy's summary plan description, check with your claims handler, or consult your disability attorney if you're unsure whether you have an "own occupation" or "any occupation" policy. Here's the difference.
"Own occupation" (often called "own occ") LTD policies generally define disability as the inability to perform the substantial and material duties of your chosen occupation for medical reasons. Thus, a firefighter who becomes unable to perform the climbing, lifting, and carrying associated with that position could be found disabled under an "own occ" policy, even if he could theoretically work in a less physically demanding profession.
For those receiving LTD benefits under an "own occ" policy, performing part-time or even full-time work in a different profession will usually not affect their receipt of benefits. However, some policies include exceptions to this general rule.
Limits on the amount of LTD benefits. Some insurers have begun inserting terms limiting the amount of benefits they 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 80% of your pre-disability earnings.
This clause means that the disabled firefighter who is able to return to work as a car salesperson and earn at least 80% of his pre-disability salary (his salary or wages on the day before he became disabled) will no longer be eligible for disability benefits.
Return to work incentives. In a similar vein, many LTD policies contain "Return to Work Incentives," which state that individuals found disabled cannot receive benefits and wages that total more than 100% of their pre-disability earnings. If your wages and monthly disability benefit exceed that threshold, your insurer will reduce your monthly benefit until your combined wages and benefits equal your pre-disability earnings. Under some policies, this dollar-for-dollar reduction occurs only during the first twelve months of disability, and continues to a lesser degree thereafter.
Professional services. There is an additional provision found in some "own occ" policies that further limits a person's ability to work while collecting LTD:
If your own occupation involves performing professional services and requires a professional or occupational license, your own occupation shall be as broad as the scope of your license.
This provision means that your own occupation will be defined as any job requiring your same license. In theory, this provision could allow an insurance company to deny LTD benefits to a surgeon who develops a hand tremor, if the insurer can demonstrate that the individual could perform any other job requiring a medical license, such as a medical school professor. How broadly this relatively new provision will be interpreted by insurers and the courts remains to be seen, but keep it 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, disabled individuals can work in another profession without affecting their receipt of LTD benefits too much. The contract provisions mentioned above have been introduced only recently into a small number of policies. If you're considering going back to work, review the terms of your policy or consult with your attorney to ensure that you continue to receive your full long-term disability benefits without interruption.
"Any occupation" (or "any occ") long-term disability 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 disability policies transition from "own occ" to the less generous "any occ" standard after a period of 24 months.
The extent to which you can return to work under an "any occ" policy depends on the specifics of your plan, but typically the more you're earning in your new job, the more your LTD check will be reduced. If you're earning less than 20% of your pre-disability income, your disability payment will likely be unaffected. On the other hand, wages of 80% or more of your pre-disability income could terminate your LTD benefits entirely.
Many policies provide for residual or partial disability payments, which allow someone capable of only part-time work to receive ongoing benefits. Earnings between 20% and 80% of your prior income will usually reduce your full LTD amount in proportion to your income. You'll be expected to provide your LTD insurer with proof of your earnings and hours worked on a monthly basis.
Finally, many "any occ" 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.
If you're collecting long-term disability benefits and thinking about going back to work, make sure you read your long-term disability policy carefully to understand how working will affect your monthly check. Contact your LTD claims administrator or, even better, a long-term disability attorney if you have questions about your policy.
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