Long Term Disability (LTD) benefits are intended to provide a portion of an individual's lost income if a covered illness or injury keeps them from working. One of the frequent inquiries from claimants is whether they can work part-time while receiving benefits. The response is not one-size-fits-all; it depends on the language of the policy, the definition of disability used at a particular point in the claim, and how earned income is used in the calculation of benefits. Part-time work during LTD is sometimes possible, but there are risks involved and these should be understood before returning to work.
Policy Language Governs the Outcome
LTD benefits are contractual benefits. The extent to which an individual can work part time and still receive benefits, or the amount of income the individual can earn without losing benefits, depends on the terms of the governing insurance policy or, in the employment context, the applicable plan document. Part-time work can be treated very differently under two policies for similar disabilities. For this reason, a claimant's first step should be a careful review of the policy's provisions on partial disability, residual disability, and permissible earnings, rather than relying on assumptions based on a friend's experience or general online information.
Partial and Residual Disability Provisions
Many LTD policies contain a partial or residual disability clause that anticipates a claimant may be able to perform some work despite an ongoing impairment. These provisions generally permit a claimant to receive income up to a certain percentage of pre-disability income without the benefits being terminated. The amount is typically around 60-80 percent of previous income, but can differ based on the insurance policy.
A standard residual disability formula means that the amount of disability benefit is deducted in proportion to the amount of earned income. When the person's income from the part-time job and the disability benefit is equal to or more than their pre-disability income, the insurer will typically further reduce the benefit, and in some instances, stop it altogether. Many of these formulas are based on a particular look back period, averaging period, or indexed earnings, so a policy that seems to allow part-time work can result in an unexpected reduction when applied. Before starting a part-time job, claimants should ask the insurer in writing how earned income will be treated.
The Distinction Between “Own Occupation” and “Any Occupation”
Another and equally important factor is the definition of disability used for the claim when considering part-time work.
Own Occupation: The majority of LTD policies start with an "own occupation" clause, which is generally in effect for the first 24 months from the onset of disability, but may be different depending on the policy. Under this standard, a claimant is considered disabled if they cannot do the material and substantial duties of their own particular job. During this phase, a claimant may sometimes accept part-time work in a different, less demanding capacity without immediately jeopardizing the claim, provided the claimant remains unable to perform the material duties of the original occupation.
Any Occupation: Most policies move to an "any occupation" standard after the own-occupation period. This is a more stringent definition, and the claimant is required to prove that they cannot perform any occupation for which they are reasonably qualified, based on education, training, or experience, regardless of whether that occupation matches the claimant's prior role or income level. If the claimant is able to work in any capacity during this period, this will significantly weaken a claim as the insurer will consider this as proof that the claimant no longer qualifies for the any-occupation definition. One of the most common areas where LTD claims are reduced, suspended or terminated after a claimant returns to work is this transition.
Insurers' Assessment of a Return to Work
From an insurer's perspective, when a claimant returns to work, even on a part-time basis, it is seen as proof that the claimant's medical condition is improving. This may lead to a formal claim review, a request for new medical records, an independent medical examination or surveillance. Many policies and claims-handling practices assume that any return to work is a signal to resume the process of re-evaluating continued eligibility, so claimants should expect this to happen, and not assume that part-time work is a routine, low-risk decision.
Precautions to Take Before Returning to Work
Claimants should consider the following before taking on a part-time job while on LTD:
- Read the policy thoroughly. Determine the exact words used in the policy to define partial disability, residual disability, earnings offsets and the own-occupation to any-occupation transition date. Avoid relying on a Summary Plan Description (SPD) alone; ask to have the policy if it is not included.
- Inform the insurance company ahead of time. Most policies require that claimants report work activity and earned income, generally on a periodic basis. Failing to disclose part-time work, even inadvertently, can be treated as a misrepresentation and used as an independent basis to deny or terminate the claim.
- Consult the treating physician. Any part-time work should be documented in the claimant's medical records and should be consistent with the documented restrictions and limitations. One of the most frequent reasons insurers give for terminating benefits is because of a gap between the medical records and the actual work activity.
- Verify earnings in writing. Request the insurance company to clarify in writing how the proposed part-time income will impact the monthly benefit and the formula used to determine the benefit amount, as well as any documentation requirements.
- Seek advice from a lawyer who has a good understanding of disability insurance claims. Because the consequences of returning to work can include a full termination of benefits, and because many LTD policies are governed by the Employee Retirement Income Security Act (ERISA), which imposes strict procedural rules and deadlines on claim appeals, legal review before returning to work is advisable in most cases.
Conclusion
It is often allowed to work part-time while on Long Term Disability benefits, but it is not always easy. The result will depend on the earnings thresholds of the policy, the timing of the own-occupation to any-occupation transition, and how the return to work is recorded and reported. Claimants should carefully consider their policy, consult with their treating physician, and seek advice from a lawyer before changing their work status, to avoid a decrease or termination of benefits.
Sign in to leave a comment.