Short answer: Most group LTD policies reduce the benefit by any Social Security Disability the claimant receives, so the carrier requires the application to trigger that offset. If SSDI is later approved with back pay, the carrier usually asks for the overpaid LTD back.
Group LTD is usually integrated: the policy pays a target percentage of earnings, minus other income such as Social Security Disability, workers’ comp and state disability benefits. To make the offset work, the contract requires the claimant to apply for SSDI and often to appeal a denial. Many carriers estimate the SSDI award and reduce the check before SSDI is approved, or pay in full in exchange for a signed agreement to repay.
SSDI is often awarded months later with back pay, and the LTD carrier then claims the overlap as an overpayment. Claimants should set the back pay aside until the carrier’s repayment request is settled.
The offset runs one way. Federal law reduces SSDI for workers’ comp and certain public disability benefits (42 U.S.C. 424a), but private group LTD is not on that list, so the LTD benefit does not reduce SSDI. Offset terms, including whether dependents’ SSDI benefits are offset, are in the policy.