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TALKING with your financial advisor

It's important to be aware of several major ways for your eligibility to be canceled, even months or years after you've successfully qualified/re-qualified.  Use the following as a check-list for use when visiting your Tax Advisor , Financial Advisor and LTD Plan case manager. Speaking as one who figured this out the hard way, it is far easier to avoid the mistakes than it is to correct the situation later. The primary disability insurance source affected by these criteria is your LTD (Long Term Disability) income.

Under what circumstances will your disability insurance benefits decrease?

The important thing for you to know is that there is fine print in each and every Long Term Disability Plan that, if you are not aware of these conditions, can cause you to loose your hard-earned LTD disability insurance benefit payment! If in doubt, call your LTD Plan carrier (your Case Manager) and ask BEFORE you take any action!   Consider the following situations:

  1. Credit/Loan Disability Protection

  • You have accumulated substantial debt from putting your kids through college. Before being diagnosed,  you took out credit disability insurance on one of your credit loans.

  • You have since begun receiving your LTD insurance benefit payment. You decide to trigger the credit disability insurance program that will pay the monthly minimum on  your credit debt for 12 months.

  • Will this cause you to have your LTD disability insurance benefit payment decreased by the credit insurance payment amount?

It depends.  It may or may not impact your LTD disability insurance benefit payment, depending on the dollar amounts being dispersed and your pre-disease income levels.  To be certain, check your LTD Summary Plan Description, or call your case worker.   Either way, it will be better to find out beforehand than to be stuck with the consequences of a wrong guess.

  1. A Retirement Plan from Another Employer

  • You worked for another employer before you went to work for the employer who paid for the LTD insurance benefit that you are now receiving.

  • You need to sell your multi-level home and buy a one-level home to accommodate your motor abilities.  You know that you can take the money from the original plan -- without tax penalty -- to use to purchase a home.   Will doing so cause you to lose your LTD disability insurance benefit payment?

Very  possibly!  DO NOT GUESS.  Again, consult your financial advisor and your case worker with the numbers.  Get the info before cashing out. 

  1. Military Pension/Disability

  • Prior to your current employer, you worked for the Military and are now eligible for a military pension/disability income.

Before you trigger these, check to see if they will impact your LTD disability insurance benefit payments.

  1. Deferred Compensation such as 401(K), 403(b), or 457 plans

  • As a prudent person, you have a deferred compensation plan in addition to your company pension.

  • You decide to trigger the disability withdrawal component of your plan to pay off debt.  In addition to the potential tax penalty, how will this affect your LTD benefits?

IT'S VERY IMPORTANT TO CHECK FIRST!  This can result a dollar-for-dollar decrease in benefits payout.

Here is some additional information about managing your personal finances within the new parameters of LTD and SSDI benefit coverage:

About Disability Insurance
http://www.about-disability-insurance.com/

Health Insurance Association of America
http://www.hiaa.org/consumer/disability.cfm

TAX ADVISOR, FINANCIAL PLANNER, LTD PLAN CASE MANAGER CHECKLIST

Here are some things to talk about with each professional:

1) Tax Advisor

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This is my current situation.

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These are my current assets.

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These are my current liabilities.

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These are some of the actions that I have considered.

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This is my short-term plan.

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This is my long-term plan.

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What do I need to take to my Financial Planner?

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Follow-up with the Tax Advisor after you have seen the Financial Planner, and have talked with your LTD Plan Case Manager.


2) Financial Planner

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I have talked to my Tax Advisor and these are all of the things that I have shared with him/her.

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This is the advice that my Tax Advisor has provided.

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What specific suggestions do you have about:

a. My deferred compensation plan(s).
b. My retirement plan(s).
c. My other assets.
d. Ways to eliminate any debt that I have.

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I understand that I have to check with my LTD Plan Case Manager before I take any action.

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Once I have done my homework, I’ll bring the information back so that, together, we can make the best plan for me and my family.

 
3) LTD Plan Case Manager

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My name is ____________________; my claim number is _______________.

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I am in the process of working with my Tax Advisor and my Financial Planner. Before we take any action, however, I want to make sure that I do not do anything to negatively impact my disability income benefit payment. As a result, I have numerous questions about which actions will and will not impact my benefit payment.

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I would like to discuss these with you over the phone. I would also like to summarize this information in a letter to you, and have you respond to my with direct citations from my LTD Plan Document, so that there will be no future misunderstanding.

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Thank you, in advance, for being so helpful.

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At this point, review with your Case Manager everything you have discussed with your Financial Planner.
 

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Take notes; write and send the letter (by registered mail so that you have proof of receipt); get the return letter.

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Revisit your Financial Planner to share the information and to take action.

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Revisit your Tax Advisor BEFORE you take action, to ensure that you are being tax prudent.

The rest of this document provides you with Sample LTD Plan Language about both compliance issues and “other income” examples. They are as examples for you to use in checking your own LTD Summary Plan Description criteria.

SAMPLE LTD PLAN LANGUAGE ABOUT WHEN/WHY DISABILITY INSURANCE BENEFIT PAYMENTS USUALLY END

Disability insurance benefit payments usually terminate/end on the first to occur of:

  1. The date you are no longer Disabled as defined (in your LTD policy);

  2. The date you fail to furnish “Proof of Loss”, when requested by us;

  3. The date you are no longer under the “regular care” of a Physician, or refuse our request that you submit to an examination by a Physician;

  4. The date you die;

  5. The date your current monthly earnings exceed:

    • 80% of your indexed pre-disability earnings if you are receiving benefits for being disabled from your own occupation;

    • an amount that is equal to the product of your indexed pre-disability earnings and the benefit percentage if you are receiving benefits for being disabled from any occupation;

  6. The date you refuse to cooperate with or try:

    • modifications made to the work site or job processes to accommodate your identified medical limitations (that lead to your impairment to working) to enable you to perform the essential duties of your own occupation ;

    • adaptive equipment or devices designed to accommodate your identified medical limitations to enable you to perform the essential duties of your own occupation;

    • modifications made to the work site or to the job process to accommodate your identified medical limitations to enable you to perform the essential duties of any occupation, if you are receiving benefits for being disabled from any occupation;

    • adaptive equipment or devices designed to accommodate your identified medical limitations to enable you to perform the essential duties of any occupation, if you are receiving benefits for being disabled from any occupation, provided a qualified Physician agrees that such modifications or adaptive equipment accommodate your medical limitations; or

  7. The date you refuse to receive recommended treatment that is generally acknowledged by physicians to cure, correct, or limit the disabling condition that qualified you to receive the disability benefit income. Also,

  8. Any disability arising from a self-inflicted injury or illness;

  9. Any disability arising from insurrection, war (declared or not) or the hostile actions of the armed forces of any country;

  10. Any disability arising from your participation in any riot or civil commotion; and,

  11. Any disability arising from committing or attempting to commit a criminal offense or provoking an assault.

  12. The Canada Pension Plan; the Canada Old Age Security Act; the Quebec Pension Plan or any provincial pension or disability plan; or similar plan or act that you, or your spouse and children are eligible to receive because of your Disability.

PLAN COMPLIANCE CRITERIA

Numbers 2, 3, 6, and 7 in the above list of criteria can be grouped into this category of “failure to comply.”  Let’s see if we can simplify these criteria.

  • Essentially, whenever you hear from your LTD Insurance company RUN, do not walk, to comply with what you are asked to do!

  • Follow your doctors' instructions to the letter.  Make sure that you have sufficient documentation about your symptoms and how these symptoms impair your ability to work. Disease-specific examples, blank forms for your use (both as Word documents and for print) are contained in the DisabilityKey.com package.  Carefully review those forms and documents.  If you've not already purchased your DisabilityKey workbook, CLICK HERE.

  • Make sure that you and your doctors are in agreement with your symptoms, your treatment, and your symptom impairments. Again, specific disease-specific examples and blank forms are available in the DisabilityKey.com workbook.

Numbers 8, 9, 10, and 11 all are conditions that usually serve as immediate reasons for termination of disability insurance benefit payments.

  • One further compliance condition not easily determined from the example plan language above concerns Social Security Disability Insurance (SSDI). When you are qualified for disability insurance benefit payment from “any occupation”, your LTD Insurance Company EXPECTS you to apply for, and to qualify for, SSDI insurance. They do this as, in most situations, they are able to deduct the amount of your SSDI benefit payment from what they are paying to you as LTD benefit payment.

  • If you do not apply, and/or, if you are not qualified in what your LTD Insurance Company expects as an “appropriate” amount of time (this varies with each plan), they will deduct that amount from your LTD benefit payment anyway. This same philosophy applies if you are entitled to any Canadian pension plan (#12 above).

What are LTD “usual and customary” Deductible Sources of Income?

  • #5 in the above-referenced sample LTD plan language begins to address what is called “deductible sources of income,” or “other sources of income.”  The better you understand precisely what this means, the easier it will be for you to retain your hard-fought disability insurance income benefit payment! Speaking from direct experience of having to repay a significant amount for NOT understanding this category, it is offered to you so that you can avoid this pitfall yourself! Again, the following information is provided to get your attention to this important matter. Please check your own LTD plan document to ensure that you are not accidentally taking an action that places your disability income at risk.

Deductible sources of income, or other income benefits mean the amount of any benefit for loss of income, provided to you or to your family, as a result of the period of disability for which you are claiming benefits under your plan. This includes any such benefits for which your or your family are eligible, or that are paid to you, to your family, or to a third party on your behalf, in accordance with:
1) Temporary disability benefits under a Workers’ Compensation law, the Jones Act, occupational disease law, similar law, or substitutes or exchanges for such benefits (i.e., Worker’s compensation payment);
2) Governmental law or program that provides disability or unemployment benefits as a result of your job with your Employer (i.e., Unemployment pay);
3) Plan or arrangement of coverage, whether insured or not, or as a result of employment by or association with the Employer or as a result of membership in or association with any group, association, union or other organization (i.e., a Union pension);
4) Individual insurance policy where the premium is wholly or partially paid by the Employer; and,
5) Mandatory no-fault automobile insurance plan.

What these deductible or other sources of income all have in common is the following: they are sources of income that you can use the same way you would use and income from work!


Good Luck!
 


 

 

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