Will Severance Affect My Long-Term Disability Benefits?
Long-Term Disability (LTD) benefits can protect a person’s income when they are unable to work due to a debilitating medical condition. Often, an employer’s benefits package includes LTD coverage. Such policies are known as “group policies,” which are governed by the federal law known as ERISA.
These benefits are necessary for many people, but what happens if you are considering stopping work due to a disability and your employer offers you severance? Or if your employer offers you severance while you are already on a leave of absence due to your medical condition? It is natural to wonder if signing such an agreement will affect your long-term disability benefits.
In short, yes, severance can affect your long-term disability benefits. But there are many facets to this issue of which you should be aware. This article will look more closely at how severance pay can affect long-term disability benefits.
What Is a Severance Package?
First, it is helpful to understand what a severance package is and why employers offer them. A severance package is often offered when an employer decides to terminate an employee. The employer will offer severance to likely “soften the blow” that the termination brings.
Severance packages and the amount paid vary from company to company, but companies often base their package on how long the employee worked there. For example, an employee who has a long tenure may get a much more lucrative agreement because the severance pay is based on their weekly salary multiplied by their years with the company. Severance pay can be given in a lump-sum payment or monthly installments.
The Fair Labor Standards Act (FLSA) does not require that employers offer severance to their employees. Instead, severance is an agreement between the employer and the employee. There is no guarantee that a company will offer such an agreement upon termination. Why, then, do employers offer it? Typically, employers offer it to avoid future lawsuits.
Severance Packages Are Often Negotiable
These packages are negotiable in many cases. It is important to look at each aspect of the severance package and determine if it makes sense for you and your situation. Certain aspects you may be able to negotiate include:
- How much severance you will receive;
- The method by which you receive your severance pay; and
- Continued healthcare plan coverage and costs;
Of course, there are also other elements you may be able to negotiate, such as the date of your termination is effective.
How Severance Pay Can Affect Long-Term Disability Benefits
Filing a disability claim after you have been terminated can be complicated, however, if your disability began when you were still employed and covered by the long-term disability policy, you can likely still submit a claim and/or receive benefits.
Moreover, if your employer terminates you while you are receiving long-term disability benefits, your benefits will typically continue under the terms of the policy, unless your policy specifically says otherwise, which is rare.
If you are being terminated but being offered a severance agreement, it may seem like the best thing to do, but this is not necessarily true. Unfortunately, signing a severance agreement and receiving severance pay can negatively affect your long-term disability benefits. When your employer offers you a severance package, they present you with an agreement to sign. While the prospect of the pay, which is normally listed within the document, is tempting, you must carefully review the agreement.
These agreements can be vague and confusing. If you read it quickly, it may not be evident what rights you are waiving. Such agreements are usually contingent upon the employee waiving certain rights and claims. For example, you may have a severance agreement wherein you relinquish all future rights to your long-term disability benefits. Part of the reason long-term disability benefits might be included in such agreements is that many severance packages require the employee to waive the right to claims under ERISA.
However, even if your agreement does not prevent you from filing for or receiving long-term disability benefits, the severance you receive could still impact your benefits. It is important to read your long-term disability policy, as your policy will likely discuss what “income” or “other benefits” your insurer will offset against your long-term disability benefits. Severance pay may be listed as “deductible income”; if your policy lists this pay as an offset, and you accept the package, this could reduce the amount of long-term disability benefits that are payable.
Moreover, once you do sign the severance agreement, it can be nigh impossible to change it. Thus, it is vital to understand what you are signing. Since these agreements can be vague or complicated, it can be beneficial to contact an attorney to help make sense of the terms therein.
How Chisholm Chisholm & Kilpatrick Can Help with Your LTD Claim
If you agree to a severance agreement, you may be waiving your right to file for LTD benefits or reduce the amount you are eligible to receive. Remember, these benefits are often crucial if you develop a medical condition that prevents you from working.
Regardless, filing for such benefits is an arduous process. You must deal with your insurance company, which is stressful. If your benefits are affected by severance, the process can become much more daunting. This does not mean you should or should not accept severance, but you must be aware of what can happen either way.
Nonetheless, Chisholm Chisholm & Kilpatrick understand how difficult it is when you have a medical condition and must file for LTD benefits. We want to lessen this burden and help you obtain the benefits that you deserve.
Our long-term disability team has over 30 years of experience dealing with insurance companies and knows how they operate. We can help you navigate the complexities of obtaining benefits so you can focus on your health.
Call CCK Today for a Free Case Evaluation
This is not an endeavor you must undertake alone. CCK can assist you no matter where in the process you are. Whether you are filing an initial claim, appealing a denial of benefits, or litigating in federal court, our long-term disability lawyers have the experience necessary to help.
Call CCK today at (800) 544-9144 for a free consultation concerning your claim with a member of our team. We will evaluate your case and determine if we can help you.
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