Over the years, clients have come to Peña & Bromberg, PLC for assistance with applying for Social Security disability benefits. One question that is frequently raised is “should I apply for SSDI if my employer or an insurance company offers long-term disability insurance?” In short, there are a number of advantages of obtaining Social Security disability benefits that may not be available through privately sponsored plans.
Increased Monthly Income
First, Social Security disability benefits offer the potential of increased monthly income. This is because SSDI disability benefit rates are raised when Social Security cost-of-living adjustments (COLA) are made, provided that the Consumer Price Index (CPI) increases a certain percentage.
Although COLA can vary from year-to-year, long-term disability benefits or disability pensions available from employers and insurance companies are not adjusted for inflation, meaning the monthly benefit amount generally remains the same. A disabled employee currently receiving $1,000/month through an employer sponsored plan, for example, will continue to receive the same rate years later, regardless of inflation.
There are also advantages of obtaining Social Security disability benefits regarding income taxes, even though 50 percent of these benefits is taxable. The key factor is how the premium on long-term disability benefits is originally paid. If the premium paid while an individual is working comes from post-tax dollars, then the long-term disability benefit is not taxed once it is received. On the other hand, if the premium is paid with pre-tax dollars, as is often the case, or the premium is paid by another source, the long-term disability benefit is considered taxable income.
Another important advantage of obtaining Social Security disability benefits is that recipients can eventually qualify for Medicare coverage, generally two years after becoming disabled. At the same time, disabled employees who qualify for protection under federal legislation known as COBRA can also benefit from receiving disability benefits.
COBRA allows an employee to purchase health coverage for 18 months after leaving a company. However, a person who qualifies for disability benefits during the first 18 month of COBRA coverage can purchase 11 additional months of coverage. This means that obtaining Social Security disability benefits allows an individual to purchase health care coverage for 29 months after becoming disabled. When COBRA coverage expires, a disabled person is then eligible for Medicare, regardless of age. This includes Part A hospital benefits, Part B medical benefits, and prescription drug benefits under Medicare Part D.
It is important to note that many employers are exempt from offering COBRA coverage, such as not-for-profit organizations and businesses with fewer employees than the federally required minimum.
Protected Social Security Retirement Benefits
The Social Security disability entitlement “freezes” Social Security earnings records during a person’s period of disability. Since those years are not counted when determining future benefits, their Social Security retirement benefits will be higher. This is because benefits are computed based on a person’s average earnings during a period of time.
If there are no earnings for months or years due to disability, and that time period is included in the calculation, the average income and the corresponding benefit computation would be lower. Finally, if a person receives Social Security disability benefits and has a dependent under age 18, he or she may also be eligible for benefits. This is not the case with employer or insurance company long-term disability plans.
Return to Work Incentives
Social Security provides benefit recipients opportunities to return to work while still paying disability benefits. When a disability claim is initially approved, Social Security will also make a determination as to whether the person’s medical condition is likely to improve. If the condition improves and the person participates in a vocational rehabilitation program, benefits continue until the program ends.
The SSA also has a “ticket to work” program that allows a person to return to work for a trial period, while still maintaining eligibility for benefits. If he or she cannot continue working, the disability benefits will continue without interruption.
California Social Security Disability Benefits Attorneys
The attorneys at Peña & Bromberg, PLC routinely work with disabled individuals in obtaining Social Security disability benefits. Because the SSA denies the majority of initial disability claims, it is crucial to have proper legal representation. We have a proven track record of helping clients obtain the benefits they deserve and will fight for your rights. Call our office today for a free consultation or complete the contact form on our website.