Is a Social Security Disability Decision Relevant When Making a Claim for Disability Benefits Under an ERISA Policy?

Disability benefits under employer-funded ERISA plans and benefits awarded by the Social Security Administration are different in many respects. First, under ERISA plans, benefit decisions are made by a private insurance company, whereas the federal government makes benefit decisions through the Social Security Administration. Under their SSDI program, you can apply for benefits regardless of your assets or income.

Some long-term disability benefit policies require that an applicant apply for Social Security benefits within a certain time period. If the employee qualifies for benefits through Social Security, this may lower the amount of benefits received through the ERISA plan.  The Social Security Administration might also lower benefits if it realizes an employee also receives them under an ERISA plan. 

Another aspect of Social Security benefits is also important to consider. In some circumstances, courts consider whether an employee qualified for disability under Social Security guidelines when deciding if an employee is entitled to benefits under an ERISA policy. That issue – whether an employee qualified for Social Security benefits – was considered by the court in a decision where an employee sought benefits under her ERISA plan.  See Sorensen v. Hartford Life and Accident Ins. Co., No. 4:21-00286, 2022 WL 2135811 (D. ID. June 14, 2022).

In Sorenson, an employee sought disability from her employer-sponsored ERISA plan as well as from the Social Security Administration. The employee was struggling with several physical and mental health conditions leading her doctors to place limitations on her work as a heavy equipment operator.  Although the employee initially received disability benefits through her employer plan, the insurer eventually changed its position and determined that the employee no longer met the policy’s definition of “disabled.”

After the employee exhausted all of her administrative remedies, she sued the insurer in federal court. The court eventually ruled in the employee’s favor and found she was entitled to benefits. In reaching its decision, the court noted that the insurer, Hartford, required the employee to apply for Social Security benefits. The administrative law judge handling the Social Security claim found the employee suffered from various conditions including fibromyalgia, sleep apnea, depression, PTSD and degenerative disc disease. Given these conditions, the administrative law judge found she qualified for Social Security benefits due to her residual functional capacity.

The federal judge in Sorenson noted how the disability insurer, The Hartford, was aware of the Social Security Administration’s award of benefits. The court noted that “evidence of a Social Security award of disability benefits is of sufficient significance and that failure to address it offers support that the plan administrator’s denial was arbitrary and was an abuse of discretion.”  This is no small finding. The court effectively said that an insurer who ignores the findings of disability by the Social Security Administration may be in violation of its fiduciary duties to employee/insureds like the employee in Sorenson.

The court in Sorenson also pointed out that The Hartford was not bound by the Social Security Administration’s decision, however, complete disregard of the decision without any explanation raises questions about the deliberative process of the insurer when denying employee benefits.