Assumptions, Calculations, and Formulas: Are My Benefit Payments Being Calculated Correctly?

            The letter finally arrived from the insurance company letting you know you will begin receiving monthly disability benefit payments.  A week or so later, a check arrives in the mail.  The check is in an amount less than your normal paycheck.  You knew disability benefits were only a percentage of your pre-disability income, so this is not surprising.  You deposit the check, assuming the insurance company has correctly calculated what you are entitled to receive.  Should you be doing more to check the amount of the payment?

            How the insurance company or plan administrator interprets your disability insurance policy or plan to create a formula to calculate your monthly benefit amount can make a significant difference in the amount of benefits you will receive.  The inputs that determine your monthly benefit are generally: your pre-disability income, the benefit percentage, and your offsets.  But the insurance company decides, based on the language in your policy, what is considered pre-disability income and what is an offset.  Moreover, the insurance company/plan administrator decides how these calculations are done and in what order.

            What is the benefit percentage?  Most policies and plans provide for a disability benefit payment that is a percentage of pre-disability income.  What percentage is used depends on the policy/plan language and what elections you made at the time you enrolled in the plan or signed up for the insurance.  Always double-check that the insurer is applying the correct percentage.  For example, if your policy provides a basic benefit of 50% and an optional additional benefit of 65%, make sure that you get paid based on the higher percentage if you elected it and paid premiums for it.

            What is “pre-disability income”? The next step is to define your pre-disability income because the benefit is going to be a percentage of that amount.  

For many people, calculating pre-disability income is simple.  It is the employee’s hourly wage or annual salary.  But for some people, how to calculate pre-disability income is less clear.  For example, with a salesperson, are his/her commissions “income” or is “income” only the hourly base wage?  Likewise, for a server in a restaurant, are tips “income?”  What about a doctor who teaches a class in addition to his/her clinical practice, is the money gained from teaching used to calculate “income?”  What about bonuses?  Whether or not these things are considered as part of pre-disability income could dramatically impact the amount of disability benefits.

What are “offsets”? Disability benefit payments will usually be reduced by income the individual receives from other sources while disabled.  Common examples of this would be Social Security Disability Insurance benefits received by the individual or his/her dependents, disability benefits from individual policies, or pension benefits.  

Your disability policy defines what income sources are considered “offsets,” and whether the amount you receive will be reduced by these “offsets.”  Sometimes it is unclear whether something you have received will be considered an offset.  For example, if you were disabled because of a car accident and you received money from a lawsuit based on the car accident, is that money an offset to your disability benefit payments?  What if you had to pay an attorney to represent you in the lawsuit, will your disability benefit only be offset by the amount you actually received from the lawsuit or will the attorney’s fee also be an offset?

The order of operations is important. The “order of operations” – the order in which these calculations are done-- also impacts your benefit amount.  For example, if your policy increases your monthly benefit over time to account for inflation (a cost of living adjustment), is that adjustment applied to your gross benefit (before offsets are applied) or to your net benefit (after offsets are deducted)?  Over time, this can cause a dramatic difference in the amount of your monthly disability benefit.

The point is… These are some decisions that are made by the insurance company, based on the language in the policy, as to how your monthly benefit is calculated.  When you begin receiving benefits, if you have any questions about how your benefit was calculated you can ask the insurance company for an explanation of how it calculated your monthly benefit amount.  If you disagree with how the benefit was calculated, you may be able to appeal to the insurance company and explain why your benefit should be calculated differently.  If you do not raise a concern about how your benefit was calculated when you first begin receiving benefits, you might waive this objection and be prevented from disputing the calculations at a later date. 

Contact an attorney specializing in employee benefits and ERISA law if you have questions about whether your benefit was calculated correctly based on the language in your policy. 

Life insurance beneficiary forms - common mistakes

Filling out the beneficiary form for your life insurance can be more tricky than you think. There are several common mistakes, including:

• Naming a minor child without designating how the money should be distributed. Money cannot be given directly to a minor child. It needs to be placed in a trust account or special account for minors such as an UTMA or UGMA account.

• Forgetting to update the beneficiary form. An insurance policy is a contract, and the money will generally be distributed how your beneficiary form says it should be done. If you have your wife as your beneficiary, and get divorced but forget to change the beneficiary designation, usually the proceeds will go to your ex-wife.

• Only naming one beneficiary. If you only name one beneficiary, and that person predeceases you, there will be no beneficiary. Make sure to name at least one secondary beneficiary.

The problems caused by a mistake on a beneficiary form will not impact you, but will greatly impact those you love.

Check out more tips in this article.

We advise both insureds and beneficiaries who have questions or problems with life insurance. Contact our office if you would like more information.  

FAQ: When should I get an attorney involved in my disability/life insurance/pension issue?

                There are three common times when you should think about involving an attorney in your ERISA employee benefits dispute or claim: (1) when submitting an application for benefits, (2) after the denial of benefits, and (3) at the commencement of litigation. Here is why you might choose to retain an attorney at any one of these times.

                You might decide to hire an attorney to submit your application or claim for benefits. This is a good strategy if you have a complicated situation or issue that may affect your application. One example might be if you are applying for long-term disability benefits after being terminated from employment or quitting from your job. Another example might be if your disabling condition is complicated your application for disability benefits may require some explanation as to why you can no longer perform you job. Applications are time consuming and complicated, so sometimes people hire an attorney to handle the application because he or she does not have the time or energy to devote to making sure the insurer receives all the information necessary. As long as your benefit plan is governed by ERISA, you will be allowed a chance to appeal any decision made by the plan administrator that is adverse to you, so many claimants choose to apply for benefits on their own and then hire an attorney only if they are denied.

                The most common time individuals hire an attorney is after he or she has had a pension, life insurance, or disability benefit denied. The attorney can then submit an administrative appeal for the claimant. An administrative appeal is a written appeal to the plan administrator explaining why the decision to deny benefits was wrong, and submitting any new evidence in support of the claim. An administrative appeal is VERY important, because once it is submitted you are frequently no longer allowed to submit any new evidence to support your claim to the insurer. Generally, it is best to consult an attorney when submitting your administrative appeal, so you can be sure the evidence in the administrative record (everything submitted to the plan administrator by you, and everything the plan administrator gathers or creates on its own in regards to your claim) is as complete as possible so the insurer can make a full and fair review of your claim for benefits.

                Once you have completed all your administrative appeals, the only option to pursue your case further is usually to bring a lawsuit in federal court. At this phase, you should almost always hire an attorney to represent you in your case. ERISA cases have complex legal issues like how much deference should be given to the insurer’s decision. It is best to have good legal representation once litigation begins.

Unemployment Compensation Appeal Argument

Here are pictures from Sarah Demers' argument at the Minnesota Court of Appeals today! The case was an appeal of a denial of unemployment compensation benefits.

Administrative Appeal Exhaustion

If the insurer makes an "adverse benefits determination" (meaning a decision that is in some way not favorable to you - such as terminating or denying your benefits claim), ERISA regulations require that you be allowed to submit an administrative appeal to the insurer. The administrative appeal must be submitted to the insurer within a time frame that is determined by the type of benefit for which you are making a claim, and should include all information you can gather in support of your claim. The administrative appeal is VERY important because once the insurer has received you appeal, there is no other chance to submit any new information. The insurer will decide whether to stand by or reverse its original decision based on what you have submitted. If the insurer decides to stand by its original decision to deny or terminate your benefits, your only recourse is usually to bring a case in federal court.


Sometimes people ask us why they should bother with submitting the administrative appeal. Maybe you are sure the insurer will deny the appeal anyway. Or maybe you are in a hurry - administrative appeals take time and money to prepare, and you may end having to bring a lawsuit in the end anyway. Why not bypass all that hassle and go right to court?


The answer is that ERISA requires you to do all required administrative appeals before bringing a lawsuit. If you initiate a lawsuit before completing the administrative appeals, your lawsuit will be dismissed without being heard. While there are a few exceptions to this rule, generally you must submit all required administrative appeal process before going to court.


If you have questions about administrative appeals, you can contact us at the Law Office of Katherine L. MacKinnon for a consultation on your case.

Assumptions, Calculations, and Formulas: Are My Benefit Payments Being Calculated Correctly?

The letter finally arrived from the insurance company letting you know you will begin receiving monthly disability benefit payments.  A week or so later, a check arrives in the mail.  The check is in an amount less than your normal paycheck.  You knew disability benefits were only a percentage of your pre-disability income, so this is not surprising.  You deposit the check, assuming the insurance company has correctly calculated what you are entitled to receive.  Should you be doing more to check the amount of the payment?

            How the insurance company or plan administrator interprets your disability insurance policy or plan to create a formula to calculate your monthly benefit amount can make a significant difference in the amount of benefits you will receive.  The inputs that determine your monthly benefit are generally: your pre-disability income, the benefit percentage, and your offsets.  But the insurance company decides, based on the language in your policy, what is considered pre-disability income and what is an offset.  Moreover, the insurance company/plan administrator decides how these calculations are done and in what order.

            What is the benefit percentage?  Most policies and plans provide for a disability benefit payment that is a percentage of pre-disability income.  What percentage is used depends on the policy/plan language and what elections you made at the time you enrolled in the plan or signed up for the insurance.  Always double-check that the insurer is applying the correct percentage.  For example, if your policy provides a basic benefit of 50% and an optional additional benefit of 65%, make sure that you get paid based on the higher percentage if you elected it and paid for it.

            What is “pre-disability income”? The next step is to define your pre-disability income because the benefit is going to be a percentage of that amount.  

For many people, “pre-disability income” is simple.  It is the employee’s hourly wage or annual salary.  But for some people, “pre-disability income” is less clear.  For example, with a salesperson, are his/her commissions “income” or is “income” only the hourly base wage?  Likewise, for a server in a restaurant, are tips “income?”  What about a doctor who teaches a class in addition to his/her clinical practice, is the money gained from teaching used to calculate “income?”  What about bonuses?  Whether or not these things are considered as part of pre-disability income could dramatically impact the amount of disability benefits.

What are “offsets”? Disability benefit payments will usually be reduced by income the individual receives from other sources while disabled.  Common examples of this would be Social Security Disability Insurance benefits received by the individual or his/her dependents, disability benefits from individual policies, or pension benefits.  

Your disability policy defines what income sources are considered “offsets,” and whether the amount you receive will be reduced by these “offsets.”  Sometimes it is unclear whether something you have received will be considered an offset.  For example, if you were disabled because of a car accident and you received money from a lawsuit based on the car accident, is that money an offset to your disability benefit payments?  What if you had to pay an attorney to represent you in the lawsuit, will your disability benefit only be offset by the amount you actually received from the lawsuit or will the attorney’s fee also be an offset?

The order of operations is important. The “order of operations” – the order in which these calculations are done-- also impacts your benefit amount.  For example, if your policy increases your monthly benefit over time to account for inflation (a cost of living adjustment), is that adjustment applied to your gross benefit (before offsets are applied) or to your net benefit (after offsets are deducted)?  Over time, this can cause a dramatic difference in the amount of your monthly disability benefit.

The point is… These are some decisions that are made by the insurance company, based on the language in the policy, as to how your monthly benefit is calculated.  When you begin receiving benefits, if you have any questions about how your benefit was calculated you can ask the insurance company for an explanation of how it calculated your monthly benefit amount.  If you disagree with how the benefit was calculated, you may be able to appeal to the insurance company and explain why your benefit should be calculated differently.  If you do not raise a concern about how your benefit was calculated when you first begin receiving benefits, you might waive this objection and be prevented from disputing the calculations at a later date. 

Contact an attorney specializing in employee benefits and ERISA law if you have questions about whether your benefit was calculated correctly based on the language in your policy.

Helpful Hints When Applying For Long or Short-Term Disability

Applying for disability benefits can be stressful. You’re sick and unable to work. You’re not sure about your financial future. You have forms to fill out, doctors to see, and decisions to be made. But being careful and thorough when filling out your application for disability benefits can prevent further hassle down the road because it improves your chances of being approved right away, and avoiding a lengthy and time-consuming appeal.

            Here are some helpful hints for filling out an application for short or long-term disability benefits. If you are still denied disability benefits after your application, we recommend speaking to an attorney experienced with appealing disability denials before appealing the decision to insure you know all your rights regarding administrative appeals.

#1. List all your health conditions

            Many people list only the one condition they feel disables them, forgetting the four or five other health issues they have that all interact to create the full picture of their health and abilities. It is important to list all your conditions so the insurance company will have all the information necessary to make its decision.

            If your disability is primarily physical, do not forget to list any psychological issues you have such as depression or anxiety in your application as well. The same goes for if your condition is primarily mental; do not forget to list your physical issues as well.

            Do not forget conditions such as: chronic pain, cognitive issues (problems with memory, not thinking clearly, or thought processing), physical or mental fatigue, migraines or chronic headaches, and other issues you may consider peripheral to your main health concern. The co-morbid effects of how these conditions interact and affect each other must be considered by the insurer.

#2. Provide All Relevant Medical Records

            Remember you are ultimately responsible to prove that you meet the definition of disabled in the policy and are therefore eligible for benefits, so you must make sure the insurer gets all the relevant medical records. When we as attorneys help claimants apply for benefits, we generally attach all relevant medical records to the application – we do not wait to see what the insurer will ask the claimant to provide. Insurers tend to request far fewer records than we provide. The insurer will request them from fewer doctors and for a shorter span of time. But it is not the insurer’s responsibility to get this information. So be proactive and make sure all medical records relevant to your health conditions are in the insurer’s hands when it reviews your claim.

#3. You Can Add Supplemental Pages

            A disability application is usually only one or two pages long – not nearly enough space to adequately explain a disabled worker’s numerous conditions, symptoms, and why he or she cannot work. Do not feel constrained by this lack of space. Simply write “See supplemental pages” in the form, and attach a type-written page fully and thoroughly answering the question asked.

#4. Explain Your Symptoms, Restrictions, and Limitations

            While it is important to list your diagnosed conditions, generally the insurer is most interested in what symptoms you actually experience, and how they prevent you from working. List all your symptoms, how severe they are, and how frequently you experience them. Then explain what specific functions you cannot perform at work because of these symptoms. Compare these two examples:

1.      I have severe migraines and my doctor says I cannot work.

2.      I have continuous migraines that have not stopped for three months. The pain fluctuates – 4 days a week the pain is a 6 on a scale of 10, and 3 days a week the pain is an 8 or 9 on a scale of 10. When the pain is above a 7, I am unable to leave my room. I turn all the lights off, pull the shades, and lay in the dark unable to sleep because of the pain. I am unable to leave my room, much less go to work and perform my duties. Also, see my neurologist’s statement supporting this application.

The second explanation explains how bad the pain is, how frequently it occurs, and why it keeps the claimant from working.

#5 What Your Doctor Needs to Say

            What your doctor says is key to whether you will receive benefits. It is important for your doctor to describe the frequency and severity of your symptoms, any measurement she or he has done of your symptoms and limitations, and list specifically what you cannot do and why. Compare the following:

1.      Betty can no longer work due to her chronic pain.

2.      I have been treating Betty for 10 years, and her chronic hip and back pain has gotten progressively worse. We have treated her with X, Y, and Z treatments which have not helped. According to the testing we have done in my office, Betty is unable to sit for more than 1 hour without being in extreme pain. She may then shift from sitting to standing, which helps for a short time. In a 12 hour period, she cannot sit for longer than 3 hours maximum.

This second example gives more detailed descriptions of what activity Betty has difficulty doing (sitting) and what her restrictions/limitations are for that activity (1 hour at a time, 3 hours maximum in one day.)

 If you have questions about how to gather necessary information, how to answer specific questions, or need help filling out the application, we have experience with the long and short-term disability application process and would be happy to speak to you. Contact the Law Office of Katherine L. MacKinnon to find out if we can help.

Social Security Disability Insurance and Long-Term Disability Benefits: Differences and Similarities

Social Security Disability Insurance and Long-Term Disability Benefits: Differences and Similarities

            Many people who qualify for long-term disability benefits may also qualify for Social Security Disability Insurance (or SSDI) benefits.  The definitions of disability are similar in most disability policies to the definition of disability used by the Social Security Administration (SSA). However, there are some notable differences between the two systems namely:

·        The SSA takes into account your age at the time you apply for benefits.  As a result, the older you are, generally the easier it will be to qualify for benefits.

·        Many disability policies separate the definition of disability into two time periods: the “Own Occupation period” and the “Any Occupation period.”  When you first apply for disability benefits, you are disabled if you cannot do your own job (this is the “Own Occupation period”) and at some point in the future, the definition often changes so that you will only be found to be disabled if you cannot do any job (this is the “Any Occupation period”). This split definition differs from the definition used by the SSA which is based on not being able to do any job. 

·        Both the SSA and your disability insurer can obtain opinions from doctors they hire or consult to give an objective opinion of your health condition and whether you are disabled.  However, the SSA is supposed to give more credit to the records and opinions of your treating doctors than to the opinions of a doctor who is not your treating physician.  In contrast, a disability insurer can generally rely on whatever doctor the insurer deems appropriate.

·        The definitions of disability in these two benefit systems are similar, but not exactly the same.  So it is possible to qualify for one type of benefit but not the other.

When applying for benefits under a long-term disability plan, it is important to let the insurance company know if you have been approved for SSDI benefits.  The insurance company does not have to agree with the SSA’s determination of disability, but a finding of disability by the SSA is important evidence that cannot be simply ignored by an insurer when making its own determination of disability.

      If you have applied for both SSDI and long-term disability benefits and been denied by one or the other, you should consult an attorney with knowledge of the procedures for appealing the denial of benefits.

Supreme Court: Two new ERISA cases!

The Supreme Court just accepted a new ERISA case with a question we at the Law Office of Katherine L. MacKinnon are excited to hear the answer to: When does a statute of limitations begin to accrue on an adverse benefits determination? We'll be holding our breath for this one...

http://www.bna.com/high-court-agrees-n17179873388/

A decision was just released earlier this week on U.S. Airways v. McCutchen, another ERISA case:

http://www.supremecourt.gov/opinions/12pdf/11-1285_i4dk.pdf

What to Do If Your Disability Benefits Are Terminated

“Your Disability Benefits Have Been Terminated.”

            Working with insurance companies to maintain disability benefits is difficult. Even after your benefit claim is approved, which is a feat in itself, the insurance company usually has the right to request that: (1) your physician submits documentation of your progress and your expected return to work; (2) you provide updated medical records from all of your doctors; (3) you submit to an examination with one of the insurer’s own physicians; or (4) that you answer lengthy questionnaires about your activities, medical condition and financial records.

We set out below some ideas of what you should do if the insurance company for your employer-provided disability benefit plan sends you a letter letting you know your disability benefits are being terminated.  But, importantly, there are attorneys (like us at the Law Office of Katherine MacKinnon) that specialize in helping people when they receive the dreaded, “your benefits are being terminated” letter.

“What Should I Do Now?”

1.      Read the letter carefully. Read the letter the insurer sends to you explaining why it is denying or terminating benefits. What are the insurer’s reasons for denying the benefits? What does the letter say the procedure is for appealing that decision?   

2.      Make note of any due dates. A letter explaining that a company is denying or terminating benefits must outline the process which you must follow to appeal the decision. The letter should also tell you the date by which any action must be taken – be careful not to wait until the last minute to either contact an attorney for help, or begin working on an appeal yourself.  The appeal is often a big undertaking.

3.      Is the insurance company asking for something? While carefully reading the letter, notice if the company is asking for any information that was not submitted. Are benefits being terminated or just suspended for failing to have a doctor submit a form? Is paperwork missing? Maybe there is something simple the company is simply missing or asking you to complete that would fix the whole problem.

4.      Write to the insurance company, and request copies of all your plan documents and a copy of your claim file. The company is required by federal regulations to provide you with “reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits.”  29 C.F.R. §2560.503-1(h)(2)(iii). Since there is a time limit on when an appeal can be submitted or a claim can be brought in court, it is important to write and ask for these documents right away.  

5.      Administrative appeal. In some circumstances a person can put together their own appeal, and in some circumstances it is best to consult an attorney. An appeal is often your best and last opportunity to furnish the insurer with all relevant information regarding your disability benefit entitlement.  The insurer needs and wants the information so that it can make an informed decision about whether you are entitled to benefits. Helpful information might include: all your medical records from each provider; a statement explaining your disability and how it affects your ability to work; letters from your doctors, coworkers, family members, or friends talking about your disability and inability to work; a videotape showing your condition and how it impacts you; your employment records showing how you struggled to work; any decisions from the Social Security Administration, other disability insurers, or other entities that considered you to be disabled.

Putting together an administrative appeal is a huge project, involving collection of many pieces of information from multiple sources. If you get confused or frustrated, you can always contact an attorney who specializes in ERISA benefits for help. Good luck!