Severance packages are often offered to employees as a form of financial support when their employment ends. However, accepting a severance package without understanding its implications can significantly impact your ability to claim short-term and long-term disability insurance benefits. If you have a disability insurance claim, and are offered a severance agreement, you should know what you are potentially giving up in exchange for the severance package and how it could impact your disability insurance benefits.
Understanding Severance Agreements
A severance package typically includes monetary compensation and other benefits provided to an employee upon termination of employment. These agreements often require employees to sign a release of claims against the employer under various employment laws, including claims under the federal statute called ERISA (Employee Retirement Income Security Act). This means that you would waive your rights related to short-term and long-term disability benefits as they are governed by ERISA. It is crucial to carefully review the terms of the severance agreement before signing.
Key elements of a severance package include:
- Monetary Compensation: A lump sum payment or continued salary for a specific period.
- Health Benefits: Continuation of health insurance coverage under COBRA or other arrangements.
- Release of Claims: A clause requiring the employee to waive legal claims, which may extend to disability insurance benefits.
- Non-Compete or Confidentiality Clauses: Restrictions on future employment or disclosure of company information.
How Severance Agreements Affect LTD Claims
Waiver of Rights
One of the most significant risks of accepting a severance package is inadvertently waiving your right to file or continue a long-term disability insurance claim. Employers and insurance companies may include language in the agreement that releases them from liability for any LTD benefits you may be entitled to. Specifically, you should look for language that includes waiving rights to claims under ERISA as this is the law that governs disability insurance claims.
Termination of Coverage
Your LTD insurance coverage is often tied to your employment. When your employment ends, so does your coverage. However, if your date of disability precedes your termination, you may still have a valid long-term disability claim. It’s essential to establish that your disability began while you were still employed and covered under the long term disability insurance policy. On the contrary, if you have already submitted your short-term or long-term claims, then the termination of coverage should not impact your claim.
Coordination with Disability Benefits
Severance payments may be considered “other income” under the terms of your STD and LTD policies, potentially reducing the benefit amount you are eligible to receive.
Steps to Protect Your LTD Claim When Offered a Severance Package
Review the Terms Carefully
Before signing a severance agreement, carefully review its terms to identify any clauses that could affect your ability to claim STD or LTD benefits. Look for language related to the release of claims or the termination of benefits.
Consult with a Disability Attorney
An experienced disability insurance attorney can help you understand the implications of the severance agreement as it relates to your short-term or long-term disability claims. They can negotiate with your employer to remove restrictive clauses or clarify your rights to disability benefits. For example, a carve-out can be drafted to specifically exclude waiving disability benefits from the agreement.
Document Your Disability
If you are experiencing a disabling condition, ensure that it is well-documented by your treating physician. Medical records should clearly establish the onset date of your disability, linking it to a time when you were still employed and covered by the LTD policy.
Communicate with the Insurance Company
Notify your short-term or long-term disability insurance provider of your condition and intent to file a claim before your employment ends. This step helps establish your eligibility for benefits and prevents potential disputes over the timing of your claim.
Negotiate Severance Terms
Work with your attorney to negotiate severance terms that preserve your right to LTD benefits. This might include removing the release of claims related to disability benefits or clarifying that the severance payment will not affect your LTD claim.
Help from a Lawyer with Expertise in Disability Insurance
The intersection of severance agreements and long-term disability insurance is complex, with significant financial and legal implications. By consulting with an experienced long term disability attorney, you can:
- Ensure that your severance agreement does not waive your rights to STD or LTD benefits.
- Protect your eligibility for ongoing or future disability benefits.
- Navigate negotiations with your employer and insurance company effectively.
This law firm was built to be a disability insurance law firm.
That focus means:
- All of our lawyers specialize in disability insurance claims;
- We have experience with every major disability insurance company;
- We have won important long term disability lawsuits.
Our disability lawyers can help you with:
- Submitting a disability insurance claim;
- Appealing a long-term disability denial;
- negotiating a lump-sum settlement; or
- Filing a lawsuit against your disability insurance company.
Hiring an experienced disability attorney is important. Because federal law applies to most disability insurance claims, our lawyers do not have to be located in your state.
Call for a free consultation with an experienced disability attorney. Pay no fees or costs unless you get paid.