Social Security Disability recipients will receive an 8.7% increase due to a COLA (Cost of Living Adjustment) in January 2023. This is the largest COLA provided by the Social Security Administration since 1981. You may wonder how this cost of living adjustment will affect your long term disability benefits. The short answer is that it probably won't.
COLAs Are Not Usually Included in Long Term Disability Offset Provisions
COLAs are not typically included in offset calculation provisions in long term disability policies. Check the provisions of your policy to be sure.
Usually, long term disability policies only offset the amount of the initial Social Security Disability award. This language will be included in a section entitled "other income benefits" or "offsets." Because SSD COLAs are not usually included in these provisions, each year's Social Security Disability COLA will likely not reduce your long term disability benefits.
Offset provisions that include a reduction for Social Security Disability benefits are typically included in long term disability policies that are provided by your employer or another group. If your long term disability policy contains this language, and if you are receiving both Long Term Disability (LTD) benefits and Social Security Disability (SSD) benefits, your LTD benefits will be offset by the amount of SSD benefits you receive.
For example, if you are entitled to receive $2,000 per month in LTD benefits and $1,000 per month in SSD benefits, your LTD monthly benefit would be reduced to $1,000.
But Social Security Disability cost of living adjustments are not typically included in offset calculations. And in some states, including California, long term disability insurance companies may not offset for SSD COLAs.
If you are receiving $1,000 per month in SSD benefits, the January 2023 COLA will increase your SSD benefit to $1,083 per month. Your LTD monthly benefit will likely not change. So using the prior example, if your LTD benefit was $1,000 after the SSD offset before the COLA, it will remain at $1,000 per month.
Of course, each long term disability policy is different. And some policies do include COLAs in the offset calculation. So it's always best to check the provisions of your particular policy. If you have questions about how your COLA will affect your long term disability benefits, contact a long term disability attorney.
The Maddox Firm Can Help You Determine Whether the SSD COLA Will Reduce Your LTD Benefits
Provisions of your long term disability policy regarding offsets for Social Security Disability Benefits, like any other provision, may be tricky to decipher. Of course, your insurance company may not make the answer easy.
Whether you have already been approved for long term disability benefits, you've been denied, or you are thinking about filing a claim, the Maddox Firm can help. Whatever your situation, the experienced team at The Maddox Firm can help you handle your long term disability claim the right way.
You should always consult with an experienced attorney before filing your long term disability claim. If you have already received a denial, you should consult with an experienced attorney before filing an appeal. The team at The Maddox Firm will look over your insurance policy, correspondence from your insurance company, medical records, and any other relevant documentation in order to give you personalized guidance on how we can help you win your long term disability claim.