How Paid Family and Medical Leave Policies Can Impact How You Choose Your Benefits

Annual enrollment will soon be underway for many employees. During this time, workers choose benefits they feel are most important to protect their health and financial well-being. Understanding the benefits your employer offers and their associated costs are most likely key considerations for you.

 

In this post, I am going to focus on one type of benefit – disability insurance – that insures your income if you can’t work for a period of time. I’ll also explain how this type of coverage interacts with a variety of paid-leave policies and programs. I hope to unravel some of the mystery and confusing terminology associated with both paid leave and income protection insurance.

 

Income sources if you can’t work

There are different ways to sustain an income when you can’t work due to an injury, illness or pregnancy. Personal savings, state and employer-paid medical and family leave, Social Security disability benefits, and private insurance are all sources that may be available. How do these sources help, and do they provide enough income to help you live the type of life you want to live?

 

Do the Research and Weigh the Facts

Disability happens! Even minor illnesses, injuries and pregnancies with a short duration of recovery (such as a knee surgery) can interfere with your ability to work and earn an income. In fact:

  • If you were to keep track of the 20 -year-olds in today’s workforce, you’d find nearly 25 percent of them will be out of work for at least one year due to heath conditions before they reach retirement. (1)
  • Almost half of American adults indicate they can’t pay an unexpected $400 bill without having to take out a loan or sell something. (2)
  • 6 percent of working Americans will experience a short-term disability (six months or less) due to illness, injury or pregnancy on average every year. (3)  

 

Make the Time to Increase your Knowledge

Where will you find the money to live if you lose your ability to work? Understanding the different income sources available can help you make choices during annual enrollment that fit your needs.

 

Employer-paid leave benefits can provide you with some kind of a paycheck when you can’t work, however, this income may not last long enough to meet your needs. And it’s up to your employer to (a) provide these benefits, (b) determine how long you can receive them, and (c) decide how much you get paid. Some paid leave programs only pay a percentage of your income – and this income is taxable. Sick leave and salary continuation benefits are examples of these benefits.

 

State- and/or federal-provided leave programs can give you an income while you’re unable to work. These programs include worker’s compensation, Social Security Disability Income, and paid family and medical leave benefits. Worker’s compensation benefits pay a percentage of your income if you have an on-the-job accident or work-related illness that cause you to leave work. Social Security provides long-term benefits if you’re disabled for at least five months, are qualified to apply, and are unable to work at any type of job. If you are approved, you may receive benefits up to the normal Social Security retirement.

 

State-mandated paid family and medical leave is emerging in a growing number of states. This short-term benefit provides you with an income while you’re out of work for medical conditions, for the birth or adoption of a child, or caring for a family member. Benefits are typically provided from 12 weeks up to 1 year and can cover from 50 percent to 90 percent of your income.

Oregon is the first state in the United States to offer 100 percent income replacement for low-wage workers taking leave for family, medical or safety reasons. Oregon (and New Jersey) includes victims of domestic violence in its paid family leave law, and defines family broadly to include “any individual related by blood or affinity whose close association with a covered individual is the equivalent of a family relationship” – in other words, you get to take time off to care for someone who is like a family member to you.

 

It’s important for you to check whether you live and/or work in a state where paid family and medical leave is available.

 

State-mandated disability insurance

State-mandated disability coverage is another source of income available to residents in a limited number of states and territories, including Hawaii, California, New York, New Jersey, Rhode Island, and Puerto Rico. These statutory plans generally provide benefits for six months up to one year. They pay you 50 percent to 70 percent of your income with a weekly cap on the maximum amount you can be paid (for example, $1,216 per week in California and $113 per week in Puerto Rico).

 

Statutory disability plans supplement your income for a short period of time, so you may want to consider adding other insurance products if you want to receive a larger sum while you can’t work, or in case you are out of work for a longer period of time

 

Voluntary, worksite or supplementary benefits. Many employers provide options for you to participate in short-term and/or long-term disability insurance. These options are offered by insurance carriers and supplement benefits you may receive from your employer, state and/or federal government programs. You pay the premiums for these optional benefits, although you usually pay less than you would if you bought this insurance on your own.

 

Short-term disability plans provide benefits for three months up to one year (after you satisfy a waiting or “elimination” period).

 

It may take a long period of time to recover from certain health conditions and complicated surgeries. In order to protect yourself from this risk, you can carry long-term disability coverage. Long-term disability insurance pays you benefits after you’ve been out of work for three months up to Social Security retirement age (again, after satisfying a waiting period).

 

Make the Choice to Protect Yourself

It’s important to understand the benefits available to you and how they work together to provide you with an income stream when you can’t work. These benefits help you live your life the way you planned to live it should you become pregnant, ill or have an injury. Making decisions about these benefits during annual enrollment is not always easy, but it is important.

 

Talk with your human resources area, read the materials available to you before annual enrollment begins, ask questions to clarify your benefits and the cost to you, and learn how all benefits may work together.

 

Most employers provide online access to information prior to annual enrollment that you can read on your own time schedule. Many employers also offer videos prior to enrollment. And meetings with human resources and insurance professionals as well as online chat may be available to help you navigate your benefit choices.

 

Remember, what you decide today could affect the rest of your life. Protect yourself and plan for unexpected events. This will help you take control of your financial well-being and help you live a happier life.

 

 

1. Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1997, Table A.
2. Ibid
3. Integrated Benefits Institute, Health and Productivity Benchmarking 2016 (released November 2017), Short-Term Disability, All Employers, Condition-specific results.

 




Podcast: What Every Employer Should Know About Social Security Disability Insurance



Introduction

Carol Harnett: [00:00:00] Hello, this is Carol Harnett. I’m the president of The Council for Disability Awareness. Welcome to our podcast, which is called The Financial Health and Income Network. Today we are going to talk specifically to employers about how Social Security Disability Insurance works and how it can help protect employees who can no longer work due to an illness or an injury.

What is important for employers to know in a grounding basis, around disability insurance products is that in the group insurance market, there is a product that most employers are probably familiar with called long term disability insurance. About one third of employees — according to the Bureau of Labor Statistics — in the United States have what’s called an LTD policy — a long term disability insurance policy — that’s either fully paid by the employer, or partially paid by the employer.

In addition to that, about half of Americans have some form of disability coverage, most of which makes up the difference. It is either a group policy that the employee pays all of the premium for instead of getting assistance from their employer, or they may be doing something called an individual disability insurance policy that they secure working directly with an agent or an advisor and an individual disability carrier.

Today we are going to focus on this very specific type of coverage that is provided by the federal government but has a very well-defined process, including a very well-defined approval process, application process, and review process. This is Social Security Disability Insurance.


You can hear the full podcast or if you’d rather read than listen, we captured the transcript from the conversation below.


Introducing Ted Norwood from IBI, Inc.

I’m really pleased to have a subject matter expert with us on the show today. My guest is Ted Norwood. He’s the general counsel and director of representation at Integrated Benefits, Inc. We are very pleased that IBI, which is their acronym, is a member of The Council for Disability Awareness and supports us. So we thank them for that. Welcome Ted. We’re so pleased to have you here with us today.

Ted Norwood: [00:02:21] Thanks Carol. It is a pleasure to be here. I’m really excited to let people know about how all this works because it is a frequently misunderstood system.

Carol Harnett: [00:02:36] If you don’t mind, I’m going to kick you off in the most basic of all things, which is: we assume that everybody understands what SSDI is, and with them we use the acronym all the time, and A, nobody even understands what the acronym means and B, really doesn’t understand what the coverage is. Can you go right to the basics and ground our employer listeners in that?

What is SSDI?

Ted Norwood: [00:03:08] Sure. SSDI– commonly just referred to as Social Security Disability– is a disability program through the federal government’s social security system that you pay into from your paycheck through your taxes.

It covers anyone that pays in. It doesn’t cover lots of federal employees, people that don’t pay those taxes. For instance, lots of teachers aren’t covered– they’re covered by different things. Railroad workers are covered by a separate policy, but they must pay in, and that differentiates it from the other social security disability program that people often combine with it or get confused by, which is SSI, or supplemental security income. This is a disability program for people that don’t have the work history or haven’t paid in. It’s a much smaller benefit.

SSDI is a better benefit; it’s a pretty strong benefit with an average payout of $1,600 a month. After being disabled for twenty-nine months, you become Medicare-eligible, and it will last until Social Security finds that you are no longer disabled or until you hit full retirement age. And they do reviews every two to five years of your case to see if you’re still disabled.

Although social security policy can bore some people– the big takeaway is that Social Security Disability is designed to work with long term disability to provide the best policies. A combination is the most important thing.

Carol Harnett: [00:05:08] That’s really well said and it’s a great basic summary. One thing I’d like to ask is– and I think some of our listeners are not familiar with — is I’ve often heard that you have to pay quote-unquote a certain amount of quarters into Social Security before you would become eligible for SSDI. What does that mean when people say that?

What is Elligibility for SSDI?

Ted Norwood: [00:05:35] It means you have to work a certain amount. You know, if you just go out and get a job and then claim disability right away, you haven’t really paid in enough to qualify. The rule is about 40 quarters, which is about 10 years of work. If you’re younger than that, there are formulas for adjusting that. When people are applying for Social Security disability, they usually have a significant amount of work history, and if they don’t have the work history, then they have to apply for the SSI. So most of your applicants are people that have a strong work record, but they’re not able to do the job that they’ve been doing anymore.

Carol Harnett: [00:06:32] Those are good points. When you say a strong work record, is that a nice way of saying that these are people who are older, who have worked for a period of time? If so, do you happen to know what the average age might be for a typical applicant?

Applicant Profile

Ted Norwood: [00:06:51] Uh-oh, I think I’m busted here because I don’t know what the average age of the typical applicant would be, but I would say it would skew older. Young people are covered. If you’re working at a salary job, odds are you’re probably covered if you’re going through, or if you have a steady job, or even steady seasonal work, but the average applicant is older. That’s probably mostly a factor of the wear and tear that goes on to your body after years of working. You know in your 20s and 30s you’re going to be stronger and more flexible, with better recovery and stuff, and less likely to have those over time injuries. So I would say that average applicant is probably around 50 if I had to guess.

Carol Harnett: [00:07:52] Okay, that seems fair. When I think about what I know about long term disability claims, we do know when people are younger that is often when we’ll see more accident related reasons for being out of work, while illness is usually the major reason why people are out on long term disability. Accidents will play a larger role the younger you are and then the older you are obviously illness tends to play the biggest role.

Now you just made a point that I think is really important for employers to understand, which is a big differentiator between long term disability insurance and SSDI, and that is this idea of what type of work are you disabled from? Are you disabled from your ability to do your own occupation, or your own job, or are you disabled from being able to do any kind of work? And can you shed some light for listeners on the requirements around your inability to work when you apply for SSDI?

Clarify the Inability to Work

Ted Norwood: [00:09:05] Absolutely. This is a critical difference between the private disability and this public disability. When people think that they’re disabled, and they can’t work as an engineer anymore, or they can’t work in their factory anymore, or as a teacher, they think: well, “I’m disabled.” If you have a private policy, then that’ll mean you will be disabled, probably for a couple of years at least.

Social Security is different. Social Security I call a “catastrophic” disability policy– that’s an unofficial term– but it only covers you if you’re disabled from any work. The language of the Act says from being able to perform jobs that exist in significant numbers. Once upon a time they liberally interpreted that and they’d cut you some slack, but over the last 15 or more years, they’ve really cracked down, and when they say significant numbers, I mean almost any job.

So, if you are, let’s say you’re 49 and and you had a really good job at a Ford plant, and you have some back problems. Maybe you had some cancer, something going on, something severe, you no longer can do that job. But if Social Security thinks that you can be a ticket taker at the movie theater on a full-time basis– which I don’t even know what movie theaters employ those people– they’re going to deny your case.  They use a lot of outdated information, which isn’t necessarily their fault, but it’s difficult and they’re very tough.

An important thing to understand is that if you’re relying on Social Security, you have to be really, really limited.  If you can’t do hard physical work, but you could do a sit-down job, there’s a really good chance you won’t get your Social Security. The terrible thing about that is that if you’re used to doing hard work, and then you want to transition to a sit-down job, it might be really hard, especially if you’re older, to transition to that. So you end up in this gap where Social Security says, “you’re not disabled, you’re capable of performing some jobs. You’re just unemployed.”  Meanwhile, unemployment says yeah, you’re unemployed; but you know, our insurance only lasts for so long, and it’s really tough for people to find the resources to be able to make those transitions and get those jobs.

Job Function Differentiation

Carol Harnett: [00:12:00] That’s a really fair point. In long term disability insurance– provided, both by an employer and bought individually by the consumer, does somebody quote-unquote meet the definition of disability? We don’t expect someone who’s done a job like a physician, for example, or a senior executive in a company, to do a job that goes outside of their knowledge, skills, and abilities. We don’t expect them to be that ticket taker at a movie theater. It’s a much closer alliance to work, that either is exactly like what they used to do, or similar to what they used to do, using transferable skills.

Sometimes, a surgeon may no longer be able to do surgery because she has a hand tremor, but she could do medical reviews for an insurance company. She could also see patients and screen them for whether they’re a candidate for surgery. That is big difference between a private disability insurance policy and a public one like SSDI, is that correct?

Accommodations for Work: Private vs. SSDI

Ted Norwood: [00:13:28] Yes, and I would add that lots of private policies that I’ve seen factor in income. For instance, you are a successful surgeon who develops a hand tremor. Although you might make several hundred thousand dollars a year, you will go to an insurance review physician position, and you are probably not going to come close to that salary.

The policies on the private side will lots of times accommodate that. They might say: “Hey, this is an offset– because you’re capable of doing this or we expect you to try to find this,” but they make up the difference. Social Security says that if you have a really solid job making $60,000 a year, but they think that you might still be able to do this job, which is minimum wage,  they expect you to go do it.

Carol Harnett: [00:14:34] Yes, I think that’s that is probably not on their radar.

Ted Norwood: [00:14:42] No. When I’ve talked to employers and when I talk to claimants and people in general, they really don’t know anything about it, I always tell them that that’s fine. Hopefully you don’t have to really ever know about the details of Social Security Disability. You find if you have to go through it, that’s really unfortunate, but once you become an employer, and you’re making decisions about whether or not to offer policies to your employees, it’s then it becomes important to understand what they’re really facing. If you think that someone will, they can just get on Social Security, you know, if they can’t work here– that’s not as easy as it may sound. Unfortunately. I wish it were.

Carol Harnett: [00:15:36] You mentioned an average benefit, but because we’re talking about the monetary side of Social Security now, can you help listeners understand the range of payments? And can you also clarify, is there a cap or a maximum that somebody might receive on Social Security Disability?

Payments

Ted Norwood: [00:16:02] Well sure. Once you go on Social Security Disability, your payment depends on your work history and your payment history. When I say your work history, that means what you’ve paid in. You don’t pay into Social Security if you make over a certain salary or income per year; you only pay up to a cap. The max benefit, what does it end up being? I think I want to say it’s about three thousand dollars, and it can go up if you have dependents because it gives you extra benefits if you have minor dependents during the same time you’re out. But you know, you can’t replace a large salary just on Social Security disability.

Carol Harnett: [00:17:00] And if there were a minimum payment?

Ted Norwood: [00:17:05] Well, the minimum payment would be about eight hundred dollars. The SSI benefit, which varies– and that’s for people that don’t have any SSDI coverage at all– usually is somewhere between five and eight hundred depending on all the factors that go into that. So SSDI is always going to be better than that.

And I say “always.” You know, whenever as a lawyer I say “always” that really just means “almost always.” Sure enough, some lawyer’s listening saying “no, that’s not true; here is the example where it’s different.” And yes, but speaking generally, for someone to take away,I would say, $800, but that’s very low.

Carol Harnett: [00:17:56] It’s not a lot of money; this is a monthly payment, just to clarify for our listeners.

Ted Norwood: [00:18:03] Yes. It’s a monthly payment.

Attorney Required

One of the things I should mention — talking about lawyers– another difference between private insurance and Social Security is you almost need to have a lawyer to get on Social Security [Disability]. If you have a terminal illness, you probably don’t, but you’re taking a risk doing it yourself. To use the Social Security’s Disability program, it’s strongly encouraged that you use an attorney– even by Social Security.

Private insurance, you don’t need an attorney to get on. Sometimes there are disputes between insurers and claimants, and you might need a specific type of attorney when that comes up. But for the most part, you don’t get an attorney to activate your private disability policy; that’s a big advantage, too.

Carol Harnett: [00:19:04] Yes. You’re leading right into the next question, which is: What is the process? How do you apply and when do you apply for Social Security disability? How does the process work and how quickly might you receive a decision?

The Application Process

Ted Norwood: [00:19:22] Social Security only covers disabilities that arise from a medically identified problem that will last for 12 months or more.

If you break both your legs, but you’re probably going to be better in six to eight months, then you won’t qualify. If there are complications with that and it ends up taking 12 months before you can go back to work, then you could qualify. However, Social Security’s going to look at that very suspiciously.

Once you are out, or once you know you’re probably going to be out for a year and facing a kind of a grim diagnosis — there’s a lot of really grim stuff we deal with in disability, obviously– then you should apply. Once you’re sure you’re not going to be able to do this for a long time, then you want to apply.

You can file online. Everyone should be online creating their My SSA Account, even if they’re not about to apply.  It’s good that Social Security’s trying to expand their online presence and getting that set up helps them out.  You can go online and apply. You can also go up to your district office; the same place where you get your Social Security card, and file an application. Social Security will take it, make sure you have coverage for SSDI. Then, they send it out to the state agency, which is a federally-funded state agency.

Evaluation

They will evaluate you. The first step takes somewhere between two and six months, and this depends on how quickly they get your doctor’s records, how backed up they are, how difficult your case is, and if they have to send you to an exam.

After the initial evaluation, there’s about a 35% chance of being awarded– which means a 65% chance of being denied. The next step is to then file a reconsideration, which is just a review by that same state agency. There are certain regions in the country currently where you don’t have to file for reconsideration, but Social Security just changed that and they’re moving to everyone going back to reconsideration.


Annual Chart for SSDI’s Overall Award/Denials at Each Level


Reconsideration

Reconsideration. It’s the exact same process again, but they have someone else at the agency look at it. Obviously since it’s the same agency, they’re not going to have the same award rate of their own denial, so it’s about a 15% chance they’ll pay that case. So an 85% chance you’re going to be denied.

Now you are 6 to 12 months into your application and you still don’t have benefits. Now you request a hearing with an administrative law judge. Your case gets back to the federal Social Security program. They’ll assign your case to a hearing office, which is different than your district office, and there’s a long wait for that. It’s somewhere between 12 and 20 months. Depending on where you are, there are a few offices that are under 12 months, and there are some offices that are getting close to 30 months of waiting time.

Building a Case

Now you wait and you build your case. Hopefully you keep going to the doctor. You don’t get any benefits, or any insurance, and you wait until you get in front of a judge. You explain your case to the judge, and you’ll give him all of you medical records that you can get a hold of, and he’ll make a decision. Hopefully you have a good attorney.

At that point you have about a 45 percent chance to be awarded. If you’re denied by an ALJ you do have an appeal within Social Security to their Appeals Council. It’s another year usually and they don’t send many cases back because they’re really trying to not add to that backlog they already have and they basically dare you to take your case to Federal Court.

Appeals in Federal Court

If you talk to your attorney and they want to take your case to Federal Court, you can do that. The courts love this because courts are ALWAYS looking to have lots of cases– that’s a lawyer joke!  Social Security floods the courts with these cases. At that point, your case is no longer actually in the agency, it’s in federal court, and you’re actually suing Social Security and saying, “hey, you guys didn’t follow your own rules, and you wrongfully denied my disability.”


Click to get average wait time for a hearing in your area.


The odss are 50/50 in the federal courts, but it’s important to remember that most attorneys will only take very strong cases to federal court. It’s a really long, difficult process and you can’t just take your chances up there. You’ve got to have a really good case now. I will say this: most attorneys only take really good cases to begin with.

One thing that’s important is there’s a myth of disability fraud, It doesn’t really exist, because you have to work so long to get coverage to even qualify. If you haven’t worked enough, your scam isn’t going to work, because you just can’t get benefits. You get awarded, only after a long, difficult process. That is, if you work long enough to qualify. You go two years without income, and then all you get is $1,800 a month, which is certainly less than you were making before. So it’s a really, really bad scam. But people continue to think there’s a lot of fraud, when most of the rot is actually on the inside.

Carol Harnett: [00:26:00] I would ask a clarifying question: you’ve mentioned having an attorney help you with your case. Is there a charge for people when they have an attorney help?

Associated Attorney Fees

Ted Norwood: [00:26:11] Social Security has really set some strict rules on on fees, and your fee always has to be approved by Social Security. You cannot charge a fee up front. All fees are– if the claimant is paying it– your fee has to be contingent, and the max you can get is 25 percent. If you use Social Security’s fee agreement, the cap is $6,000. An attorney can charge their fees and expenses to a claimant. Most do, but some don’t though, and some attorneys will ask for money up front to hold to cover expenses and stuff, but most don’t. It’s pretty much free for you to get the attorney to do their work, but they’ll only take your case if they think they can win. If they don’t think you have a case then it’s not a sound business decision for them.

Carol Harnett: [00:27:08] Great. Well, I can’t believe how fast this time is going. We have a little less than three minutes.

Ted Norwood: [00:27:14] I saw that.

Carol Harnett: [00:27:16] I had to look at my list of questions and I think the best one to choose at this point is: in your experience what final closing words of advice would you give to employers when you think about disability in general and Social Security disability insurance on top of that?

Final Word to Employers

Ted Norwood: [00:27:35] Group private disability insurance is a pretty affordable benefit, and it is a lifesaver for your employees if they go out of work. Fighting with Social Security is so hard. Everyone we represent that has LTD says, “that $10 a month was the best decision I ever made.” They get their benefits quicker. They still have to go through the Social Security process, because there’s an offset to that LTD, but they have money, they’re getting something. They’re not scrambling.

Social Security– if you have to wait for Social Security, it doesn’t just decimate your spirit and your income; it decimates your insurance coverage; your ability to pay for the doctors, who eventually stop seeing you. It ruins marriages and relationships and strains your family because people lose their houses. And it is long and difficult and tragic. It’s so affordable and such a good benefit to give to your employees. When they go out sick, or they get cancer, they wear down– and they’re better-taken care of. I believe in it,  and it was not even on my radar when I came out of law school; I hope employers at least look into it.

Carol Harnett: [00:29:08] Well said. I’ve known a gentleman by the name of Dick Mucci who currently runs the group insurance operation at Lincoln Financial. He has worked in and around individual disability and group disability, the private industry, his whole career. He has always said he couldn’t imagine why employers wouldn’t provide long-term disability coverage. It’s difficult for an employer to lay someone off after three or six months and leave them without some form of an income to help them get through long term disability.

So with that, Ted, I’m going to say, thank you so much for the information you shared. It’s been a privilege to have you on this show.

Ted Norwood: [00:29:54] Thanks for having me; I appreciate it. Good luck, everyone.

Carol Harnett: [00:29:57] Thank you, everyone. Bye-bye.


Click below for more articles from Ted Norwood about Social Security Disability Insurance.




An Employer’s Guide to Understanding Social Security Disability Insurance



Introduction

Carol Harnett: [00:00:00] Hello, this is Carol Harnett. I’m the president of The Council for Disability Awareness. Welcome to our podcast, which is called The Financial Health and Income Network. Today we are going to talk specifically to employers about how Social Security Disability Insurance works and how it can help protect employees who can no longer work due to an illness or an injury.

What is important for employers to know in a grounding basis, around disability insurance products is that in the group insurance market, there is a product that most employers are probably familiar with called long term disability insurance. About one third of employees — according to the Bureau of Labor Statistics — in the United States have what’s called an LTD policy — a long term disability insurance policy — that’s either fully paid by the employer, or partially paid by the employer.

In addition to that, about half of Americans have some form of disability coverage, most of which makes up the difference. It is either a group policy that the employee pays all of the premium for instead of getting assistance from their employer, or they may be doing something called an individual disability insurance policy that they secure working directly with an agent or an advisor and an individual disability carrier.

Today we are going to focus on this very specific type of coverage that is provided by the federal government but has a very well-defined process, including a very well-defined approval process, application process, and review process. This is Social Security Disability Insurance.


You can hear the full podcast or if you’d rather read than listen, we captured the transcript from the conversation below.


Introducing Ted Norwood from IBI, Inc.

I’m really pleased to have a subject matter expert with us on the show today. My guest is Ted Norwood. He’s the general counsel and director of representation at Integrated Benefits, Inc. We are very pleased that IBI, which is their acronym, is a member of The Council for Disability Awareness and supports us. So we thank them for that. Welcome Ted. We’re so pleased to have you here with us today.

Ted Norwood: [00:02:21] Thanks Carol. It is a pleasure to be here. I’m really excited to let people know about how all this works because it is a frequently misunderstood system.

Carol Harnett: [00:02:36] If you don’t mind, I’m going to kick you off in the most basic of all things, which is: we assume that everybody understands what SSDI is, and with them we use the acronym all the time, and A, nobody even understands what the acronym means and B, really doesn’t understand what the coverage is. Can you go right to the basics and ground our employer listeners in that?

What is SSDI?

Ted Norwood: [00:03:08] Sure. SSDI– commonly just referred to as Social Security Disability– is a disability program through the federal government’s social security system that you pay into from your paycheck through your taxes.

It covers anyone that pays in. It doesn’t cover lots of federal employees, people that don’t pay those taxes. For instance, lots of teachers aren’t covered– they’re covered by different things. Railroad workers are covered by a separate policy, but they must pay in, and that differentiates it from the other social security disability program that people often combine with it or get confused by, which is SSI, or supplemental security income. This is a disability program for people that don’t have the work history or haven’t paid in. It’s a much smaller benefit.

SSDI is a better benefit; it’s a pretty strong benefit with an average payout of $1,600 a month. After being disabled for twenty-nine months, you become Medicare-eligible, and it will last until Social Security finds that you are no longer disabled or until you hit full retirement age. And they do reviews every two to five years of your case to see if you’re still disabled.

Although social security policy can bore some people– the big takeaway is that Social Security Disability is designed to work with long term disability to provide the best policies. A combination is the most important thing.

Carol Harnett: [00:05:08] That’s really well said and it’s a great basic summary. One thing I’d like to ask is– and I think some of our listeners are not familiar with — is I’ve often heard that you have to pay quote-unquote a certain amount of quarters into Social Security before you would become eligible for SSDI. What does that mean when people say that?

What is Elligibility for SSDI?

Ted Norwood: [00:05:35] It means you have to work a certain amount. You know, if you just go out and get a job and then claim disability right away, you haven’t really paid in enough to qualify. The rule is about 40 quarters, which is about 10 years of work. If you’re younger than that, there are formulas for adjusting that. When people are applying for Social Security disability, they usually have a significant amount of work history, and if they don’t have the work history, then they have to apply for the SSI. So most of your applicants are people that have a strong work record, but they’re not able to do the job that they’ve been doing anymore.

Carol Harnett: [00:06:32] Those are good points. When you say a strong work record, is that a nice way of saying that these are people who are older, who have worked for a period of time? If so, do you happen to know what the average age might be for a typical applicant?

Applicant Profile

Ted Norwood: [00:06:51] Uh-oh, I think I’m busted here because I don’t know what the average age of the typical applicant would be, but I would say it would skew older. Young people are covered. If you’re working at a salary job, odds are you’re probably covered if you’re going through, or if you have a steady job, or even steady seasonal work, but the average applicant is older. That’s probably mostly a factor of the wear and tear that goes on to your body after years of working. You know in your 20s and 30s you’re going to be stronger and more flexible, with better recovery and stuff, and less likely to have those over time injuries. So I would say that average applicant is probably around 50 if I had to guess.

Carol Harnett: [00:07:52] Okay, that seems fair. When I think about what I know about long term disability claims, we do know when people are younger that is often when we’ll see more accident related reasons for being out of work, while illness is usually the major reason why people are out on long term disability. Accidents will play a larger role the younger you are and then the older you are obviously illness tends to play the biggest role.

Now you just made a point that I think is really important for employers to understand, which is a big differentiator between long term disability insurance and SSDI, and that is this idea of what type of work are you disabled from? Are you disabled from your ability to do your own occupation, or your own job, or are you disabled from being able to do any kind of work? And can you shed some light for listeners on the requirements around your inability to work when you apply for SSDI?

Clarify the Inability to Work

Ted Norwood: [00:09:05] Absolutely. This is a critical difference between the private disability and this public disability. When people think that they’re disabled, and they can’t work as an engineer anymore, or they can’t work in their factory anymore, or as a teacher, they think: well, “I’m disabled.” If you have a private policy, then that’ll mean you will be disabled, probably for a couple of years at least.

Social Security is different. Social Security I call a “catastrophic” disability policy– that’s an unofficial term– but it only covers you if you’re disabled from any work. The language of the Act says from being able to perform jobs that exist in significant numbers. Once upon a time they liberally interpreted that and they’d cut you some slack, but over the last 15 or more years, they’ve really cracked down, and when they say significant numbers, I mean almost any job.

So, if you are, let’s say you’re 49 and and you had a really good job at a Ford plant, and you have some back problems. Maybe you had some cancer, something going on, something severe, you no longer can do that job. But if Social Security thinks that you can be a ticket taker at the movie theater on a full-time basis– which I don’t even know what movie theaters employ those people– they’re going to deny your case.  They use a lot of outdated information, which isn’t necessarily their fault, but it’s difficult and they’re very tough.

An important thing to understand is that if you’re relying on Social Security, you have to be really, really limited.  If you can’t do hard physical work, but you could do a sit-down job, there’s a really good chance you won’t get your Social Security. The terrible thing about that is that if you’re used to doing hard work, and then you want to transition to a sit-down job, it might be really hard, especially if you’re older, to transition to that. So you end up in this gap where Social Security says, “you’re not disabled, you’re capable of performing some jobs. You’re just unemployed.”  Meanwhile, unemployment says yeah, you’re unemployed; but you know, our insurance only lasts for so long, and it’s really tough for people to find the resources to be able to make those transitions and get those jobs.

Job Function Differentiation

Carol Harnett: [00:12:00] That’s a really fair point. In long term disability insurance– provided, both by an employer and bought individually by the consumer, does somebody quote-unquote meet the definition of disability? We don’t expect someone who’s done a job like a physician, for example, or a senior executive in a company, to do a job that goes outside of their knowledge, skills, and abilities. We don’t expect them to be that ticket taker at a movie theater. It’s a much closer alliance to work, that either is exactly like what they used to do, or similar to what they used to do, using transferable skills.

Sometimes, a surgeon may no longer be able to do surgery because she has a hand tremor, but she could do medical reviews for an insurance company. She could also see patients and screen them for whether they’re a candidate for surgery. That is big difference between a private disability insurance policy and a public one like SSDI, is that correct?

Accommodations for Work: Private vs. SSDI

Ted Norwood: [00:13:28] Yes, and I would add that lots of private policies that I’ve seen factor in income. For instance, you are a successful surgeon who develops a hand tremor. Although you might make several hundred thousand dollars a year, you will go to an insurance review physician position, and you are probably not going to come close to that salary.

The policies on the private side will lots of times accommodate that. They might say: “Hey, this is an offset– because you’re capable of doing this or we expect you to try to find this,” but they make up the difference. Social Security says that if you have a really solid job making $60,000 a year, but they think that you might still be able to do this job, which is minimum wage,  they expect you to go do it.

Carol Harnett: [00:14:34] Yes, I think that’s that is probably not on their radar.

Ted Norwood: [00:14:42] No. When I’ve talked to employers and when I talk to claimants and people in general, they really don’t know anything about it, I always tell them that that’s fine. Hopefully you don’t have to really ever know about the details of Social Security Disability. You find if you have to go through it, that’s really unfortunate, but once you become an employer, and you’re making decisions about whether or not to offer policies to your employees, it’s then it becomes important to understand what they’re really facing. If you think that someone will, they can just get on Social Security, you know, if they can’t work here– that’s not as easy as it may sound. Unfortunately. I wish it were.

Carol Harnett: [00:15:36] You mentioned an average benefit, but because we’re talking about the monetary side of Social Security now, can you help listeners understand the range of payments? And can you also clarify, is there a cap or a maximum that somebody might receive on Social Security Disability?

Payments

Ted Norwood: [00:16:02] Well sure. Once you go on Social Security Disability, your payment depends on your work history and your payment history. When I say your work history, that means what you’ve paid in. You don’t pay into Social Security if you make over a certain salary or income per year; you only pay up to a cap. The max benefit, what does it end up being? I think I want to say it’s about three thousand dollars, and it can go up if you have dependents because it gives you extra benefits if you have minor dependents during the same time you’re out. But you know, you can’t replace a large salary just on Social Security disability.

Carol Harnett: [00:17:00] And if there were a minimum payment?

Ted Norwood: [00:17:05] Well, the minimum payment would be about eight hundred dollars. The SSI benefit, which varies– and that’s for people that don’t have any SSDI coverage at all– usually is somewhere between five and eight hundred depending on all the factors that go into that. So SSDI is always going to be better than that.

And I say “always.” You know, whenever as a lawyer I say “always” that really just means “almost always.” Sure enough, some lawyer’s listening saying “no, that’s not true; here is the example where it’s different.” And yes, but speaking generally, for someone to take away,I would say, $800, but that’s very low.

Carol Harnett: [00:17:56] It’s not a lot of money; this is a monthly payment, just to clarify for our listeners.

Ted Norwood: [00:18:03] Yes. It’s a monthly payment.

Attorney Required

One of the things I should mention — talking about lawyers– another difference between private insurance and Social Security is you almost need to have a lawyer to get on Social Security [Disability]. If you have a terminal illness, you probably don’t, but you’re taking a risk doing it yourself. To use the Social Security’s Disability program, it’s strongly encouraged that you use an attorney– even by Social Security.

Private insurance, you don’t need an attorney to get on. Sometimes there are disputes between insurers and claimants, and you might need a specific type of attorney when that comes up. But for the most part, you don’t get an attorney to activate your private disability policy; that’s a big advantage, too.

Carol Harnett: [00:19:04] Yes. You’re leading right into the next question, which is: What is the process? How do you apply and when do you apply for Social Security disability? How does the process work and how quickly might you receive a decision?

The Application Process

Ted Norwood: [00:19:22] Social Security only covers disabilities that arise from a medically identified problem that will last for 12 months or more.

If you break both your legs, but you’re probably going to be better in six to eight months, then you won’t qualify. If there are complications with that and it ends up taking 12 months before you can go back to work, then you could qualify. However, Social Security’s going to look at that very suspiciously.

Once you are out, or once you know you’re probably going to be out for a year and facing a kind of a grim diagnosis — there’s a lot of really grim stuff we deal with in disability, obviously– then you should apply. Once you’re sure you’re not going to be able to do this for a long time, then you want to apply.

You can file online. Everyone should be online creating their My SSA Account, even if they’re not about to apply.  It’s good that Social Security’s trying to expand their online presence and getting that set up helps them out.  You can go online and apply. You can also go up to your district office; the same place where you get your Social Security card, and file an application. Social Security will take it, make sure you have coverage for SSDI. Then, they send it out to the state agency, which is a federally-funded state agency.

Evaluation

They will evaluate you. The first step takes somewhere between two and six months, and this depends on how quickly they get your doctor’s records, how backed up they are, how difficult your case is, and if they have to send you to an exam.

After the initial evaluation, there’s about a 35% chance of being awarded– which means a 65% chance of being denied. The next step is to then file a reconsideration, which is just a review by that same state agency. There are certain regions in the country currently where you don’t have to file for reconsideration, but Social Security just changed that and they’re moving to everyone going back to reconsideration.


Annual Chart for SSDI’s Overall Award/Denials at Each Level


Reconsideration

Reconsideration. It’s the exact same process again, but they have someone else at the agency look at it. Obviously since it’s the same agency, they’re not going to have the same award rate of their own denial, so it’s about a 15% chance they’ll pay that case. So an 85% chance you’re going to be denied.

Now you are 6 to 12 months into your application and you still don’t have benefits. Now you request a hearing with an administrative law judge. Your case gets back to the federal Social Security program. They’ll assign your case to a hearing office, which is different than your district office, and there’s a long wait for that. It’s somewhere between 12 and 20 months. Depending on where you are, there are a few offices that are under 12 months, and there are some offices that are getting close to 30 months of waiting time.

Building a Case

Now you wait and you build your case. Hopefully you keep going to the doctor. You don’t get any benefits, or any insurance, and you wait until you get in front of a judge. You explain your case to the judge, and you’ll give him all of you medical records that you can get a hold of, and he’ll make a decision. Hopefully you have a good attorney.

At that point you have about a 45 percent chance to be awarded. If you’re denied by an ALJ you do have an appeal within Social Security to their Appeals Council. It’s another year usually and they don’t send many cases back because they’re really trying to not add to that backlog they already have and they basically dare you to take your case to Federal Court.

Appeals in Federal Court

If you talk to your attorney and they want to take your case to Federal Court, you can do that. The courts love this because courts are ALWAYS looking to have lots of cases– that’s a lawyer joke!  Social Security floods the courts with these cases. At that point, your case is no longer actually in the agency, it’s in federal court, and you’re actually suing Social Security and saying, “hey, you guys didn’t follow your own rules, and you wrongfully denied my disability.”


Click to get average wait time for a hearing in your area.


The odss are 50/50 in the federal courts, but it’s important to remember that most attorneys will only take very strong cases to federal court. It’s a really long, difficult process and you can’t just take your chances up there. You’ve got to have a really good case now. I will say this: most attorneys only take really good cases to begin with.

One thing that’s important is there’s a myth of disability fraud, It doesn’t really exist, because you have to work so long to get coverage to even qualify. If you haven’t worked enough, your scam isn’t going to work, because you just can’t get benefits. You get awarded, only after a long, difficult process. That is, if you work long enough to qualify. You go two years without income, and then all you get is $1,800 a month, which is certainly less than you were making before. So it’s a really, really bad scam. But people continue to think there’s a lot of fraud, when most of the rot is actually on the inside.

Carol Harnett: [00:26:00] I would ask a clarifying question: you’ve mentioned having an attorney help you with your case. Is there a charge for people when they have an attorney help?

Associated Attorney Fees

Ted Norwood: [00:26:11] Social Security has really set some strict rules on on fees, and your fee always has to be approved by Social Security. You cannot charge a fee up front. All fees are– if the claimant is paying it– your fee has to be contingent, and the max you can get is 25 percent. If you use Social Security’s fee agreement, the cap is $6,000. An attorney can charge their fees and expenses to a claimant. Most do, but some don’t though, and some attorneys will ask for money up front to hold to cover expenses and stuff, but most don’t. It’s pretty much free for you to get the attorney to do their work, but they’ll only take your case if they think they can win. If they don’t think you have a case then it’s not a sound business decision for them.

Carol Harnett: [00:27:08] Great. Well, I can’t believe how fast this time is going. We have a little less than three minutes.

Ted Norwood: [00:27:14] I saw that.

Carol Harnett: [00:27:16] I had to look at my list of questions and I think the best one to choose at this point is: in your experience what final closing words of advice would you give to employers when you think about disability in general and Social Security disability insurance on top of that?

Final Word to Employers

Ted Norwood: [00:27:35] Group private disability insurance is a pretty affordable benefit, and it is a lifesaver for your employees if they go out of work. Fighting with Social Security is so hard. Everyone we represent that has LTD says, “that $10 a month was the best decision I ever made.” They get their benefits quicker. They still have to go through the Social Security process, because there’s an offset to that LTD, but they have money, they’re getting something. They’re not scrambling.

Social Security– if you have to wait for Social Security, it doesn’t just decimate your spirit and your income; it decimates your insurance coverage; your ability to pay for the doctors, who eventually stop seeing you. It ruins marriages and relationships and strains your family because people lose their houses. And it is long and difficult and tragic. It’s so affordable and such a good benefit to give to your employees. When they go out sick, or they get cancer, they wear down– and they’re better-taken care of. I believe in it,  and it was not even on my radar when I came out of law school; I hope employers at least look into it.

Carol Harnett: [00:29:08] Well said. I’ve known a gentleman by the name of Dick Mucci who currently runs the group insurance operation at Lincoln Financial. He has worked in and around individual disability and group disability, the private industry, his whole career. He has always said he couldn’t imagine why employers wouldn’t provide long-term disability coverage. It’s difficult for an employer to lay someone off after three or six months and leave them without some form of an income to help them get through long term disability.

So with that, Ted, I’m going to say, thank you so much for the information you shared. It’s been a privilege to have you on this show.

Ted Norwood: [00:29:54] Thanks for having me; I appreciate it. Good luck, everyone.

Carol Harnett: [00:29:57] Thank you, everyone. Bye-bye.


Click below for more articles from Ted Norwood about Social Security Disability Insurance.




How Employer-Provided Disability Insurance Can Help When SSDI Falls Short

Important details about employer paid insurance to help fill the gap when social security income is delayed or falls short

Half of American workers have some sort of disability coverage: either employer-paid long term disability insurance, one they pay for through an agent, and/ or one funded by the federal government called Social Security Disability Insurance (or SSDI). Below are facts regarding SSDI and LTD. It is important for employers to know that SSDI is designed to work with long term disability to provide the best policies for employees.

The following content has been provided to the CDA by Ted Norwood, the General Counsel and Director of Representation, at Integrated Benefits, Inc.

The Relationship Between SSDI and Private Group Insurance


  • According to the Council for Disability Awareness, half of those who don’t work for the government have some form of employer-paid disability insurance. This could be short-term disability only, long-term disability only, or both STD and LTD. These benefits are important because 25 percent of today’s 20-year-olds will at some point miss a year or more of work due to medical problems.
  • As companies become leaner, employees become even more vital to the organization’s success and more difficult and expensive to replace. In the long term, losing employees is difficult. Certainly, an increasing number of employers recognize the value of employee well-being. In fact, many companies now recognize the value of caring for employees as people, not just assets.  Therefore, private disability insurance benefits in the workplace is an important way for employers to care for employee financial health.
  • About half of workers in the private sector do not have income-replacement benefits. If they’re unable to work for an extended period of time, they must rely on the Social Security Administration’s Disability Income (SSDI) program – if they qualify – to partially replace their salaries.


Facts About SSDI


  • You must have worked to qualify and made Social Security contributions. (Teachers often do not make Social Security contributions.)
  • You must qualify medically and vocationally.
  • SSA does not consider income in its evaluation of disability.
  • The SSA only evaluates whether an individual could perform the function of a job that exists.
  • SSDI Application Process – The wait is long (15 months or more). It can be challenging to get approved, and it lacks good recovery resources.


Group Long Term Disability Policies Protect Employees from the Disadvantages of SSDI


  • These LTD policies usually start with an own-occupation period of two years. As a result, the employee receive benefits immediately on completion of the elimination period (3 or 6 months).
  • Group LTD policies usually pay higher benefits than SSDI does. They typically treat SSDI benefits as an “offset” which means the additional coverage is available at an affordable price.
  • Group insurers typically require claimants to apply for SSDI benefits, but most of them will also provide a lawyer to assist with the applications.
  • Group LTD policies have better opportunities to provide vocational rehabilitation and return to work services.


For more from Ted Norwood on SSDI check out the following articles:





The basics of the Social Security Disability Income Program

By Ted Norwood, General Counsel and Director of Representation, Integrated Benefits, Inc.

The United States Social Security Administration offers two programs—confusingly named Social Security Disability Income and Supplemental Security Income—aimed at providing or supplementing the income of people who are unable to work.

SSDI (also called Title II benefits) provides disability coverage for individuals who have paid enough Social Security taxes. The second program, SSI or Title XVI, provides a smaller benefit for people who haven’t worked long enough to qualify for Title II benefits and established a financial need.

SSDI and SSI require the same medical requirements to receive benefits. However, SSI also requires claimants to pass a stringent means, or income, test that establishes the applicant’s need.

For the purposes of this post, I’m going to focus on the SSDI program. This benefit has greater relevance than SSI to the majority of employers and workers. In addition, this program frequently interacts with employee benefits, especially long-term disability policies.

But before I proceed, it’s important to remind you that I’m presenting basic information. If you have specific legal questions about SSDI, you should reach out to a lawyer. SSDI is a huge program with many regulations and significant administrative entities. My goal in this article is to focus on a few key elements that are important to employers and employees.

I find that most people know something about the SSDI program and many hold opinions on it already, but there is an abundance of misinformation. Before you can understand SSDI’s role in workplace absences, you must understand the program’s basics.

In many ways SSDI is like a private long-term disability policy that you have through the government. Like any insurance policy, the terms are important.

You must have worked to qualify

To receive SSDI benefits, you must have worked and paid the SSA’s taxes. If you are an independent contractor and don’t pay FICA taxes, you may not be covered. There are boring rules that you can access here if you want more information.

If you want to know if you are covered, you can simply contact SSA and they can tell you if you are insured and when your insured status would end if you stopped working.

You must qualify medically and vocationally

If you are covered, you may qualify medically for SSDI if you are:

  1. Not working
  2. Have limitations caused by medical conditions expected to last at least a year, and
  3. You are unable to sustain substantial gainful activity due to your limitations.

The SSA will deny benefits if they believe you can still perform a significant number of jobs that exist in the national economy or if you can perform past work (from the last 15 years).

Many Issues are surprisingly irrelevant to the SSA

Social Security does not consider income in its evaluation of disability. If a person who made a high salary can still perform lower income work, they are not disabled under SSDI. Likewise, a person who worked in labor, such as construction or manufacturing, may not be disabled if they are still capable of performing less demanding jobs.

SSDI also does not consider whether jobs are available or if an individual may or may not be hired for a job. The SSA only evaluates whether an individual could perform the functions of a job that exists.

The SSA considers problems finding employment to be addressed by unemployment insurance. But, to that end, applying for both unemployment and SSDI will usually have detrimental effects on the SSDI application. The SSA sees the receipt of both benefits as generally incompatible (with exceptions).

The SSDI Application Process

Individuals may apply for SSDI on the SSA’s website or at a Social Security office. A state agency will evaluate the application, review medical records and determine if the claimant is disabled under SSA’s rules. This usually takes three to six months with a 34 percent award rate.

If denied, a claimant can request reconsideration by the state agency. This essentially repeats the process, with a 13 percent approval rate.

If denied again, the claimant may request a hearing before an administrative law judge. There is a nine- to 27-month wait from hearing request to hearing with a national average wait of 17.3 months. The ALJ’s decision takes about another 60-90 days and ALJs awarded 47 percent of cases last year.

There is one more level of appeal within SSA – the Appeals Council – but the success rate is only 10 percent. After that, a claimant must file a civil case in federal court.

Obviously, it is a long process. This wait has a huge impact on the claimants. Waiting 30 months to get a payment is not uncommon. The SSA makes retroactive payments in a lump sum, but that is often cold comfort for claimants. The average wait time for all claimants is about 15 months before they receive a payment.

When Awarded SSDI

Disabled claimants receive an average monthly benefit of about $1300. There is a five-to-six month elimination period at the beginning of the period of disability.[The SSA provides annul adjustments for cost of living.

Two years after the end of the claimant’s elimination period, they will begin receiving Medicare.

There are some programs in place to support attempts to return to work, with mixed results. The SSA generally schedules continuing disability reviews (CDRs) every three to five years.

SSDI certainly has some warts, but overall American workers benefit tremendously from this program.

 




Student Loan Debt and Long-term Disability Insurance: What You Need to Know

Long-term Disability Insurance

These days, student loan debt is as American as apple pie. Whether your dream is a white picket fence or all the avocado toast you can eat, if you went to college, you likely have student loan debt.

Seeing money drained from your bank account every month can cause a lot of stress.

But you know what’s worse? Not being able to make those payments because you’re disabled and can’t work.

Long-term disability insurance helps protect you from life’s unknowns and ensures you have a paycheck even when you’re not working.

For anyone still paying off student loan debt, disability insurance is a must-have so you don’t fall behind on your loan payments.

Long-term Disability Insurance Protects You from Student Loan Debt

Long-term disability insurance is important for a lot of people, because not many of us can afford to go without a single paycheck, never mind go months or years without getting one. Even emergency funds only go so far.

But disability insurance is particularly important for people with student loans, especially new grads. Why?

  • The student loan burden is frontloaded. According to research by Payscale, graduates one year out of school pay around 30% of their income to their student loans. Ten years after graduation, that number drops to 10%. For recent grads, that means it’s easy to fall behind early on. It’s hard enough to pay off student loans. The last thing anyone needs is to be behind the 8-ball when their payments are highest.
  • Pay is low early in careers. We all have to pay our dues, and it takes some time before we’re making the big bucks. New grads are stretched thin with low incomes, “adult” expenses, and student loans on top of all of that. There may not even be enough wiggle room to create a robust emergency fund yet. The point is, high expenses and low income mean missteps are even more costly. A disability insurance policy guarantees that you have some money coming in if you’re disabled. Even if you earn a low salary, some money is better than none.
  • Student loan debt is at a record high. American student loan borrowers have a collective $1.4 trillion in debt. And it’s not just your four-year university attendees; enrollment in postsecondary education, like medical school, has been on the rise in recent years. Doctors and lawyers may be high earners one day, but until then they have relatively low pay and relatively high student loan debt. There’s a lot of risk out there as more and more students take on loan, and it’ll only get higher in the coming decades.

Just like student loans are an investment in yourself, so is long-term disability insurance. You’re protecting your most valuable asset – your ability to make money – and taking a big risk by not having the protection you need, especially while your debt is so high.

Student Loan Disability Riders

A standard long-term disability insurance policy will help cover all of your expenses. You apply for a policy, including a specified length of time (the benefit period) and coverage amount (up to 60% of your net income), and you can use the benefit for whatever expenses you see fit.

But when it comes to student loans, a student loan disability rider can give you a little bit of extra protection.

An insurance rider is a tweak to your policy to customize it to fit your needs.

In this case, for a small addition to your monthly premium, a student loan disability rider adds on coverage to the benefit amount that goes toward student loan payments. There are some caveats to student loan disability riders:

  • Coverage is usually capped at somewhere around $2,000-$2,500 a month.
  • The student loan benefit goes directly to the provider, not the beneficiary.
  • There may be limits on the degrees/professions that qualify for a student loan disability rider.

A student loan disability rider is an affordable addition to a policy – popular insurer Guardian offers riders starting at $5 a month – and can work well for someone with high student loans who wants to make sure there’s dedicated protection going to that debt.

Total and Permanent Disability Discharge

If you’re a borrower who got your loan from the federal government, you have another option to avoid falling behind on your loans if you become disabled: a total and permanent disability (TPD) discharge.

A TPD discharge applies to the following public loans:

  • William D. Ford Federal Direct Loan (Direct Loan) Program loan
  • Federal Family Education Loan (FFEL) Program loan
  • Federal Perkins Loan (Perkins Loan) Program loan
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant service

There’s a difference between being disabled for a while and being totally and permanently disabled, and the guidelines for proving that your TPD is strict.

The Department of Education notes you need to have confirmation from the Department of Veterans Affairs (if you’re a vet), the Social Security Administration (if you receive Social Security disability insurance), or your doctor. Each method requires specific documentation.

Still, if you have federal loans, it’s important to look into if you qualify. TPD has a huge impact on your future earnings, and you would be doing yourself a huge disservice if you didn’t do everything in your power to eliminate your debt.

Like other types of insurance, disability insurance gets more expensive the older you get. Paired with the facts that, in general, your student loans are higher the younger you are, and your pay lower, it’s never too early to buy long-term disability insurance and protect yourself.

Originally published on PolicyGenius.




The Odds of Winning With Social Security Disability Insurance (SSDI)

ssdi

My good friend Will Rogers once said “There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves.”

While we can all agree that learning is important, the method in which we learn makes all the difference. Being proactive about your financial situation is easier than being reactive and finding out the hard way. There are plenty of qualified financial planners who can assist with investments or advice on how to use life insurance to reduce your estate taxes.  However, few of them really understand the importance of income protection. For those who would rather avoid unintentional self-inflicted electro-shock therapy, here are the basics of Social Security Disability Insurance (SSDI) and why you may be overestimating it’s worth.   

The SSDI program was enacted as part of the Social Security Act of 1935. To make a long story short, it was designed in part to empower each state to reimburse a percentage of an individual’s lost wages if they were deemed unable to work. Sounds like a life-changing government benefit, right? If you qualify for disability coverage and are awarded benefits, it will certainly provide for basic necessities. But in recent years there have been economic pressures making it more difficult to qualify.  

What Does it Take to Qualify for SSDI?

In order to qualify for disability benefits you must meet a set of guidelines. This includes two earnings tests and satisfying a strict definition of disability. If you haven’t worked enough (paid enough Social Security taxes) prior to your disability, you may not be eligible. Most people don’t have a problem meeting this condition. It’s the definition of disability that proves difficult to overcome. Per SSDI guidelines, benefits are paid to “people who can’t work because they have a medical condition that’s expected to last at least one year or result in death.” Whether you meet this criteria depends ultimately on how your condition affects your ability to work. Conditions that are severe, such as total paralysis, severe brain damage, or late-stage cancer, increase your chances of being awarded benefits. Other conditions, like migraine headaches, depression may be prove more challenging.

Can You Work?

Regardless of your condition, the SSDI claims examiners review your medical records and determine whether you’re able to work. They start by evaluating whether your medical condition would keep you from doing the tasks of your current or any previous job. If the answer is yes, you are disqualified from receiving benefits.

Then they will see if there is any work you would be capable of doing. If the answer is no, benefits could be awarded assuming other criteria are met. The key point is, regardless of your current job, to qualify for SSDI benefits you must be unable work in any capacity.

The reality is we’re all human and claims decisions are made using logic and judgement, both of which are never perfect.

Reality Bites

Knowing what you know now, would you rely on SSDI as your only source of income protection? If you need more statistical evidence before you make your decision, keep reading. According to data from the Social Security Administration (SSA), only 32 percent of applications submitted were approved. Those who were denied benefits are entitled to an appeal, but unfortunately the average length of time to get a hearing is 600 days. While it’s difficult to determine how many appeals are ultimately approved, it’s important to know that regardless of your condition it takes loads of paperwork, medical records, and time to come to any decision.

Can You Afford to Wait?

Contrary to what Mick Jagger says, time is not on your side. Being struck with a life altering medical condition isn’t something you’ll find on anyone’s “to do list”, but the snowball effect it could have on your finances is substantial.

To put this into perspective, take a moment to tally your monthly net income (take home pay). Now think of all your creditors (people you owe money to) standing with their hand out every month. How much is left over? How much is in your savings? Do you even have a savings account? Is there a financial plan in place to prepare for an unexpected disability?

If you’re like most people, spending more and saving less is the new status quo. If you are currently relying on SSDI benefits as your only source of income protection, consider this, according to the SSA the average monthly benefit awarded in 2016 was $1,171. Yes, you read that correctly. The average payout is less than $300 per week. If you’re a homeowner this won’t even cover your mortgage and utilities. In fact, according to data provided by the US Census bureau, the average monthly cost to own a home in the United States is $1,492.

This figure includes the mortgage, real estate taxes, insurance, utilities, and various HOA and condo fees. With this logic you would be short $321 every month.

Think about the impact this would have on your ability to make your car payment(s), buy groceries, and pay your newly accrued medical bills. Even with help from SSDI, it would be extremely difficult to maintain your current lifestyle under these financial pressures.

Act Now!

These government programs, including SSDI, were created with the best of intentions. But the ability to continue funding these programs is constantly debated. Be proactive and research different ways to replace your income if you are unable to work. Don’t wait until after you’ve peed on the electric fence to ask for help, chances are there will be no one around.




How to Get the Most Out of Your Disability Coverage

How to Get the Most Out of Your Disability Coverage

What happens when that lower back pain that’s kept you out of work for a month doesn’t go away? Or you’re still having mobility issues months after your knee surgery?

You may be anxious to get back to work after a short-term disability leave, but it’s not always possible.

That’s where long-term disability benefits, including Social Security Disability Insurance (SSDI) and long-term disability insurance come in.

Although often confused with one another by workers, SSDI and long-term disability insurance are not the same thing.

These two programs can, however, work in tandem to provide income replacement due to a long-term—or permanent—disability.

Here’s what you need to know.

What is Long-Term Disability Insurance?

Long-term disability insurance picks up where short-term disability insurance leaves off. It’s designed to provide partial income replacement when you are unable to do your usual work for an extended length of time.

Long-term disability insurance is provided by some employers as an optional employee benefit.

Workers can also purchase individual policies through their financial advisor or insurance broker.

When provided by an employer, long-term disability insurance has an initial eligibility waiting period that is typically covered by a short-term disability insurance benefit.

What is SSDI?

SSDI is a Federal government program that replaces your income in the event of a long-term or permanent disability.

SSDI benefits are based upon your average annual earnings and pay out up to $2,687 per month, as of 2017.

To get an idea of your average annual earnings, review your annual social security statement.

It can be difficult—and time consuming—to qualify for SSDI payments, and you must meet the following long-term disability requirements:

  • Prove you have at least one severe medical impairment. This must be documented by objective medical evidence.
  • Prove the condition makes it impossible to return to your past work.
  • Prove there isn’t other work you could qualify for.
  • The disabling condition must last at least one full year while being severe enough to make it impossible to actively engage in work.

In many situations, although the disability keeps you from doing your usual work, you would be able to qualify to do other work.

This other work, however, is typically lesser-skilled work outside of your usual compensation levels. That’s why it’s a good idea to supplement it with a long-term disability policy.

How SSDI and Long-Term Disability Insurance Work Together

Because SSDI is based on your lifetime earnings history—not your latest job, it rarely pays even half your current income.

For workers making over $70,000 per year, the $2,687 maximum monthly payment is less than half their income.

Many workers would find it difficult to pay their bills with SSDI funds alone.

However, if you have long-term disability insurance, you can receive up to 60 percent of your pre-injury earnings.

Most long-term disability insurance policies require that you first apply for SSDI. You are able to receive payments from both SSDI and long-term disability concurrently. Your insurance carrier then adjusts your long-term disability insurance payments based on how much you will receive from SSDI.

A long-term physical disability can be a significant financial burden.

Although SSDI provides a minimal safety net for significant disabilities, it’s not enough for most workers to make ends meet. But when combined with a long-term disability insurance policy, it can provide more significant income protection.




Is Your Financial Plan Prepared for an Unexpected Disability?

Is Your Financial Plan Prepared for an Unexpected Disability?

You’re enjoying your after-work jog when you slip and fall, injuring your back. What initially was just a clumsy accident, or so you thought, becomes a month—or more—out of work as you wait for the pain to subside and your physical therapy to take effect.

Unlike an on-the-job accident, which is likely to be covered under Worker’s Compensation, it is up to you to prepare for and deal with incidents like these once they happen.

In addition to tapping into your emergency fund, here are three other ways to potentially cope with replacing your lost income when you’re out of work due to a disability.

SSDI/State Disability

Many workers think Social Security Disability Insurance (SSDI), or their state’s program, will cover their loss of income if they are unable to work.

Yet SSDI benefits average $1,171 a month. That’s just above the 2017 federal poverty line for an individual. For further context, SSDI replaces less than half of the income of anyone earning over $30,000 a year.

If you are one of the 75 percent of full-time workers in America who earn more than this threshold, you are looking at a severe income loss if you experience a disability and rely on SSDI.

The SSDI application process can take months or even years, making alternate sources of income replacement necessary.

However, many other forms of income replacement—such as PTO or unemployment benefits—disqualify you from SSDI benefits.

Employer Sick Pay and Paid Time Off (PTO)

If you’ve banked sick days and other paid time off (PTO), your employer may either allow or compel you to use them if an illness or injury leaves you unable to work.

Many State Disability programs require a minimum number of days of missing work before kicking in.

Using your PTO will typically make you ineligible for receiving SSDI or State Disability payments until their required amount of missed work days after your PTO runs out.

Disability Insurance

Your most comprehensive income replacement source is short-term or long-term disability insurance.

Short-Term Disability (STD) pays you a portion of your income for a short period of time after you run out of sick leave. Many employers offer options with differing levels of coverage.

STD insurance is designed to replace your income over a short period of time while you recover from the illness or injury that is preventing you from working. While most claims last three to six months, you may be eligible for coverage under STD for up to one year depending on your plan.

Long-Term Disability (LTD) pays you a portion of your income after you run out of both sick leave and STD coverage.

LTD insurance pays a percentage of your salary up until retirement age—if permanently disabled—or when you are able to work at 80 percent of your prior level. This coverage typically replaces 50 to 60 percent of your salary, depending on the policy.

To ensure you have a plan in place to address the possibility of short or long-term disability, download our disability benefits inventory checklist and talk to your financial advisor.




Social Security Disability Insurance Made Simple

Social Security Disability Insurance Made Simple

The cost of the Social Security Disability Insurance program has risen exponentially in recent years. Costs have ballooned so much that the $140 billion program was—until a November 2015 budget deal was reached—on pace to run out of money in 2016.

Despite the recent budget deal, which will reallocate payroll tax revenues to beef up the Social Security Disability Insurance fund, the program’s benefits and qualifications are by no means set in stone.

Here’s a bit more about how Social Security Disability Insurance works, and how big changes may still be on the horizon. The benefits of nearly 11 million people are at stake.

How Social Security Disability Insurance is funded

In government speak: OASI + DI = OASDI

The Social Security program, consisting of both retirement (Old-Age Survivors Insurance or OASI) and disability insurance (DI), is funded through separate payroll tax and self-employment tax contributions—not through regular federal income taxes.

The DI portion of the program is much smaller and less well known. Both are administered by the Social Security Administration. By law, these funds are maintained separately from the U.S. government’s general fund.

The contribution rate to these funds are set by Congress. The current contribution rate is 12.4 cents per dollar earned, up to a taxable maximum, which is currently $118,500. Employees have their contribution split equally between them and their employer, so it’s 6.2% each. (Self-employed individuals pay the full rate themselves.)

The funds are then allocated either to the retirement or disability program. Currently, 1.8 cents per dollar go to the disability fund, with the remaining 10.6 cents going to retirement.

Lingering effects of the post-2008 crash

Despite the cash infusion from the November budget deal, the Social Security Disability Insurance trust fund is still not inexhaustible. Have a look at the net decrease in assets since 2009 on this table (and keep in mind those numbers are in millions).

The depletion in the trust fund is simply caused by expenditures being higher than costs. While both have been rising steadily, expenditures have risen at a lower rate than revenues.

The fund had previously seen annual surplus from 1994 to 2008. At the end of 2008 the fund held nearly $216 billion in reserves. Since 2008 (and the brutal post-2008 recession), expenditures have exceeded revenue by an average of $25 billion a year.

Rising beneficiary numbers

The increase in expenditures has a simple explanation–more people receiving payments, or “beneficiaries.” This in turn is caused by the number of “new” beneficiaries exceeding the number who return to the workforce and stop receiving benefits. (The percentage of people who go on disability and then return to the workforce is quite low.)

During the post-2008 recession, the number of new beneficiaries rose sharply. The number of terminations also rose, but not at the same rate.

Since 2010, the number of new beneficiaries has been falling, but has still exceeded the number of terminations, and this means that the total number of beneficiaries has continued to rise, albeit at a slower rate. America’s aging workforce is a primary factor in the increase. In 1980, there were roughly 100 million workers covered by SSDI, and about 30 percent were over 45. In 2013, there were roughly 150 million covered workers, with 45 percent over 45. As we age, we tend to experience more health problems, and thus are more likely to file an SSDI claim.

What the future holds … who knows?

For those depending on Social Security Disability Insurance, or who one day will, the future is unclear. Will the government let the SSDI fund dry up a few years down the road? What happens then? Will our leaders make a move to avert such a situation?

The only certainty, really, is that there’s a lot at stake, and that some sort of change to the program is inevitable. So stay tuned, and stay informed!

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