Changes in Social Security Disability Benefit Rules May Affect Employer Long-term Disability Plans (Benefits)

September 1, 1995 Advisory

Employers who sponsor disability benefit plans in which benefits are reduced by social security disability benefits should be aware that the US. Department of Health and Human Services recently issued new regulations providing for the premature suspension or termination of social security disability benefits in certain cases involving drug or alcohol abuse.

The new requirements affect social security disability benefits payable to individuals for whom drug addiction or alcoholism ("DAA") is a material contributing factor to the determination of disability. Under the new rules, social security disability benefits may be prematurely suspended or terminated if the DAA beneficiary fails to comply with an appropriate treatment plan. In addition, as of March 1, 1995, there is a 36- month limit on the payment of DAA-related social security disability benefits. Significantly, the benefit suspension and termination provisions will apply notwithstanding that the beneficiary may still otherwise be deemed to be "disabled" for social security purposes.

Employers who sponsor disability benefit plans that offset social security disability benefits should review their plan documents to make sure that they will not inadvertently be required to increase plan benefit payments to a disabled individual (because of the loss of the offset) if the individual's social security disability benefits are cut off under the new rules.