ERISA LTD Disability Offset 2027 Calculator
Calculate the offsets ERISA group long-term disability (LTD) plans take against your benefit when you receive other disability income — SSDI, workers compensation, state SDI, even some retirement distributions. Critical for understanding why a "60% of income" policy often pays much less.
How ERISA Offsets Work
ERISA group LTD plans almost universally offset dollar-for-dollar against other disability income — SSDI, workers comp, state SDI, sometimes pension or 401(k) hardship distributions. A "60% of income" policy paying $6,000/month gross becomes $3,800/month net if SSDI is $2,200. The 60% headline rate is gross, before offsets — net replacement is typically 40-55% once SSDI and any state benefits kick in.
Why Offsets Exist
Insurers structure LTD to prevent over-insurance — receiving more in disability than your pre-disability income, which would discourage return to work. Whether this rationale holds when LTD adds to SSDI is debated, but ERISA preempts most state-law arguments. Some employer-sponsored ERISA plans add a minimum floor (10% of gross or $100/month) so the offset cannot zero out the LTD entirely.
SSDI Approval Process
LTD insurers REQUIRE you to apply for SSDI within 6-12 months of LTD approval. If you do not, they can estimate your SSDI amount and offset that estimate. The two-year wait for SSDI approval often means the insurer pays full LTD initially, then claws back the SSDI amount once you get SSDI back-pay. Plan for the repayment — many LTD recipients are shocked when the lump-sum back-pay reimbursement demand arrives.
Individual Disability Policies — No Offset
Individual disability insurance (IDI) policies you buy yourself with after-tax dollars do NOT offset against other income. They pay the full benefit regardless of SSDI, workers comp, or state SDI. This is why high earners often stack: employer ERISA group LTD for base, plus individual policy for top-up that pays unreduced. Premium for individual policies is higher (typically $80-200/month for a $5k/month benefit) but the no-offset structure is worth it.
Sources: erisa.dol.gov LTD plan rules, ssa.gov SSDI offset. Last updated: May 2026.
Frequently Asked Questions
Do ERISA LTD plans always offset SSDI?
Almost always. The standard ERISA LTD plan offsets SSDI dollar-for-dollar. Some plans have a minimum floor (10% of gross) so LTD never zeros entirely.
Do individual disability policies offset?
No. Individual disability insurance (IDI) you buy yourself does not offset against SSDI, workers comp, or state SDI. It pays the full benefit regardless of other income.
Will I owe back-pay if SSDI approves later?
Yes. Insurer pays full LTD during the wait, then demands repayment when SSDI back-pay arrives. Set aside the SSDI back-pay until you reconcile with the insurer.
Is LTD taxable?
If employer paid the premium (group LTD), LTD benefit is taxable. If you paid the premium with after-tax dollars (individual policy or employee-paid group), benefit is tax-free. SSDI is partially taxable based on combined income.
Is this tool private?
Yes. All calculations stay in your browser. Income and benefit data are never sent, stored, or shared.