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.