The first step in proving a claim for Social Security Disability is to show that the claimant is no longer engaging in substantial gainful activity. Basically, this means showing that the claimant is no longer working above a certain threshold. To make this determination, Social Security Administration obtains queries from the Internal Revenue Service, which include reports of taxable income payments made by employers. When an individual has stopped working but receives short-term or long-term disability payments from a private insurance plan, this income often appears to be wages on the earnings queries. However, such payments should not bar a disability claim as they are not actually “wages.” Under 20 CFR 404.1049, payments to a claimant under an employer’s plan or system are excluded from wages, if made for medical expenses in connection with sickness or accident disability. A claimant can readily explain this income in their written application forms or at an interview with agency personnel.
When an individual collects private disability payments, many private insurance policies include a clause requiring that the insured party file for Social Security Disability and other public benefits as well. If successful, the private insurance company will offset their payments by the amount of public benefit received, though they cannot deduct more than what they have paid. Employees should read their insurance policies carefully before purchasing a private plan.
This is not to say that private disability plans are not worth the price. Rather, the offsets are often built into the plan to offer a lower premium. Also, consider that when filing for a public benefit such as Social Security Disability, the process for approval can be long and arduous, whereas private insurance companies may be more willing to pay out in the interim.
While an insurance broker can help you decide whether to purchase a private insurance plan, if you need help collecting either private or public disability benefits you may need the assistance of a lawyer.
