legal & legislative reporter
Dependent Social Security Disability Benefits
to Offset Long-Term Disability Benefits
T
DISABILITY
BENEFITS
he United States Court of Appeals for the
Seventh Circuit finds that the defendant
long-term disability plan permitted an offset for Social Security disability benefits payable
to a child based on a parent’s disability.
The plaintiffs were participants in separate
long-term disability plans (the plans) provided
by their respective employers. The plans provided
for a reduction of private disability benefits if the
disabled employee also receives federal disability
benefits under the Social Security Act (SSA). Specifically, the plans required offsets for “loss of time
disability” benefits.
The plaintiffs received benefits under the plans
and also SSA benefits. The plaintiffs’ SSA benefits
included amounts payable to them as primary disability insurance benefits and amounts payable on
behalf of their dependent children based on a par-
It notes that virtually all courts
considering this issue have found
that a dependent child’s SSA
benefit was subject to offset under
nearly identical policy language.
ent’s disability. The plaintiffs challenged the plan
administrators’ decision to include in the offset
calculation the benefits paid to their dependent
children. The plaintiffs contend that a child’s SSA
disability benefit based on a parent’s disability is
not a “loss of time disability” benefit. The district
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court granted the defendants’ motion for summary
judgment. The plaintiffs then filed this appeal.
The Seventh Circuit initially addresses the
proper standard of review. The court notes that
the plans do not contain language conferring discretion on the plan administrator. While there is
an “ERISA statement” attached to each policy that
contains discretionary language, the court finds
that “where no discretionary language is contained in the plan itself, discretionary language
contained in a summary plan description is not
sufficient to alter the standard of review.” Thus, the
court finds it necessary to review the plan administrator’s interpretation of the plans under de novo
review.
In assessing the merits of the plaintiffs’ claims,
the Seventh Circuit notes that the plaintiffs accept
that their own primary SSA disability benefits are
“loss of time disability” offsets under the plans.
The plaintiffs contend, however, that their children’s SSA disability benefits should not be used as
offsets because the purpose of such payments “is
not to replace income that the household has lost
as a result of the parent’s inability to work;” rather,
they argue that the purpose of such benefits is to
provide additional “support” for the child. The
plaintiffs maintain that the phrase “loss of time” is
a term of art meaning “loss of business time connected with the insured’s occupation.”
The Seventh Circuit disagrees with the plaintiffs’ assessment of the children’s SSA disability
benefits as “support” benefits. It notes that virtually all courts considering this issue have found
that a dependent child’s SSA benefit was subject
to offset under nearly identical policy language.
The court concludes there is “no meaningful basis” on which to distinguish the phrase “loss of
income,” which is used in analogous cases, and
the phrase “loss of time,” which is used in the
plans. The court finds that the slightly different
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legal & legislative reporter
Dependent Social Security Disability Benefits
continued from page 58
language has the same intended consequence of
offsetting the amount of money the insured employee receives as replacement income pursuant
to the employee’s long-term disability benefit by
the amount of money that the employee and his
or her dependents receive as replacement income
under SSA.
After finding that the only reasonable interpretation of an offset for “loss of time disability” benefits includes a child’s SSA disability benefit, the
Seventh Circuit further notes that the plans specifically identify SSA benefits received by dependent children as eligible for offset. The plaintiffs
contend that the plans’ language applies to benefits paid to disabled children of a disabled parent,
Implementation of Health Benefits Plan
continued from previous page
representative of its employees “if, absent a final
agreement or a bargaining impasse, he unilaterally imposes changes in the terms and conditions
of employment.” If there is an impasse, however,
the “employer does not violate [NLRA] by making unilateral changes that are reasonably comprehended within his pre-impasse proposals.”
In this case, the District of Columbia Circuit
finds that the issue is not whether an impasse
existed. Rather, the issue is whether the plaintiff
company unilaterally implemented the company
plan on December 22, when there was an impasse,
or on March 1, when there was no impasse. The
court ultimately concludes that the company implemented the company plan on December 22, at
the time when there was an impasse, and, therefore, the company did not engage in unfair labor
practices.
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benefits magazine july 2012
but not to payments to a nondisabled child of a
disabled parent. The court finds that this interpretation would lead to the “untenable” result of the
household with both a disabled parent and a disabled child receiving a lesser benefit than a household with one disabled family member. Thus, the
court clarifies that the plans’ offsets would “not
apply to Social Security benefits paid because of
the child’s disability.”
The Seventh Circuit finds the plan administrators properly administered and applied the offset
to the plaintiffs’ benefits based on the SSA disability benefit received by their dependent children. The Seventh Circuit affirms the district
court’s summary judgment order in favor of the
defendants.
Schultz et al. v. Aviall Incorporated Long Term Disability Plan et al., No. 11-2889 (7th Cir. Mar. 2, 2012).
In reaching this conclusion, the District of Columbia Circuit notes that the plaintiff company
implemented its last best offer on December 22
and that the company plan was also “unquestionably one of the terms and conditions” of the company’s last best offer. While the company plan did
not go into effect until March 1, the court finds
that it was “implemented” on December 22 and
between December 22 and March 1, the company
was taking steps to move affected employees from
the previous plan to the company plan. Accordingly, the court rejects the NLRB’s conclusion,
based on the administrative law judge’s decision,
that the company did not implement the company
plan until its effective date of March 1. The District of Columbia Circuit finds the NLRB’s decision arbitrary and capricious and determines that
the plaintiff company did not engage in unfair labor practices.
Comau Inc. v. National Labor Relations Board, No. 101406 (D.C. Cir. Mar. 2, 2012).