Independently document your symptoms, medication side effects, doctors’ visits, and general wellness as much as you can. Medical records often have errors or do not completely reflect what was discussed during your visits. Keeping your own log
Be truthful and thorough when you present your medical conditions, especially if you have co-morbid or multiple conditions.
From time to time, an ERISA long term disability benefit plan may miscalculate your benefit payment and overpay you. If the overpayment is small and due to a miscalculation, the plan or insurer usually recovers the overpayment by reducing future disability benefits. An overpayment can also result from obtaining other income benefits, typically Social Security disability benefits. Most disability plans/policies require you to apply for Social Security disability benefits.
Insurance companies do this to lessen their financial responsibility, because the amount of monthly long term disability benefits are reduced by the amount of Social Security disability benefits. Because the process of obtaining Social Security disability benefits takes much longer than the process of obtaining long term disability benefits, plans usually give claimants the option of having the plan estimate the amount of monthly Social Security disability benefits and deduct that amount from the monthly long term disability benefits or having the plan pay the full monthly long term disability benefits in exchange for the promise to repay any overpayment that results from the receipt of Social Security disability benefits. Often the disability insurance carrier will require you sign a reimbursement agreement with the second option. The reimbursement agreement does not take your disability claim outside of the scope of ERISA.
Because the process of obtaining Social Security disability benefits takes so long, when the Social Security Administration determines that a claimant is entitled to benefits, the decision is retroactive and the award includes a lump sum for past due benefits. The retroactive award usually overlaps with the period during which the plan paid unreduced long-term disability benefits resulting in an overpayment of benefits. Insurance companies are profit-driven and will want to recover the overpayment.
Plans seek the overpayment in one of three ways: 1) request a lump sum payment from the claimant; 2) recover the overpayment from future benefits; or 3) threaten to recover the overpayment through legal or equitable means. To make an informed choice, it is important you fully understand the third option. The purpose of that option is to intimidate claimants into complying with the first option. You should not be scared because ERISA only allows equitable remedies, the third option is limited to equitable means. Under ERISA, the only equitable remedy available to a plan is restitution. But ERISA is complex—even for attorneys, unless you work with highly experienced lawyers who practice exclusively in disability benefits law for OPR Disability Law does.
In 2012, the Ninth Circuit Court of Appeals considered an ERISA benefit plan’s insurer’s claim for recovery of an overpayment from the plan participant. Reversing the district court, which had given the insurer a money judgment equal to the overpayment, the Ninth Circuit held that a money judgment is legal relief barred by ERISA. The Court held that the insurer’s remedy was restitution and required the insurer to specifically identify a particular fund in the insured’s possession that consisted of the insurer’s funds. Bilyeu v. Morgan Stanley Long Term Dis. Plan, 683 F.3d 183, 1093-94 (9th Cir. 2012). In other words, an insurer is only allowed to recover its own money that remains in the insured’s possession. In that case, the insurer terminated long-term disability benefits 18 months before the claimant obtained Social Security benefits. By that time, she had spent all of the plan benefits and no fund existed from which the insurer could seek restitution. The insurer could not recover the overpayment. Four years later, the Unites States Supreme Court reached the same conclusion in Montanile v. Bd. of Trs. of the Nat’l Elevator Indus. Health Ben. Plan, 136 S. Ct. 651, 656-58 (2016). ERISA limits insurers to equitable remedies. Insurers cannot seek recovery from a participant’s general assets because that is a legal remedy. Insurers have no legal remedies under ERISA. Montanile is clear; no form of equitable relief is available if the insured is no longer in possession of the disability payments. Thus, option 3 is only an option is the claimant has not spent the monthly disability benefits. But most claimants struggled to live paycheck to paycheck before becoming disabled and their disability benefit is only 60% of their pay. A claimant who does not have to spend their entire disability benefit each months is unusual. Thus, it is a rare case where an insurer would have an equitable remedy. With no legal or equitable remedy, option 3 is not a viable option.
With that in mind, consider the plan’s other options: request a lump sum payment or offset future benefits. For most claimants, the only means of making a lump sum payment is to turn over the lump sum received from the Social Security administration. An insurer has no right these funds. The United States Supreme Court explained in Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416 (1973) that 42 U.S.C. § 407(a) bars any claims against Social Security benefits. In Philpott, the Supreme Court held that 42 U.S.C. § 407(a) protects Social Security benefits from creditors even when commingled with other assets. If a claimant refuses to voluntarily repay the overpayment, the plan has only one option—offset future benefits. Considering that the plan and insurer have fiduciary obligations to act in the claimant’s best interest, this really should be the only option. That requesting a lump sum payment from a claimant is not in the claimant’s best interest is obvious. Having money is better than not having money. If the claimant does not make the lump sum payment, assuming the claimant is still on claim, the plan will eventually recover the overpayment from future benefits and not be harmed. After all, the Social Security administration will have just determined that the claimant is disabled under a standard much more stringent than the plans. The plan should have no reason to terminate benefits. On the other hand, if the claimant repays the overpayment and the plan terminates benefits despite the Social Security administration’s determination, the claimant is left nearly destitute.
If the overpayment is related to a disability benefits not governed by ERISA, the analysis is entirely different. For non-ERISA benefits, an insurer will have legal remedies. When the plan or insurer demands reimbursement of an overpayment from you, before making a decision on what to do, you should consult us to understand your best option.
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