Part of our guide: Disability Income Insurance: Solutions, Tools and Guides →
Employees often assume their group disability benefit and any Social Security disability benefit will add together. In most group plans, they don’t. The group plan pays less when Social Security pays anything.
Key takeaways
- Most group LTD plans include offsets: benefits are reduced by Social Security disability and other income sources.
- Group benefits are usually taxable when the employer pays the premium, and many plans exclude bonuses and commissions.
- Individual disability insurance generally has no Social Security offset and pays tax-free benefits when premiums are paid with after-tax dollars.
In a typical group LTD plan, every dollar of Social Security disability reduces the group benefit. The total doesn’t go up.
How offsets work
Group LTD plans typically promise a percentage of salary, often 60%, from all sources combined. If the employee qualifies for Social Security Disability Insurance (SSDI), workers’ compensation, or other disability income, the group plan subtracts those amounts. Many plans also estimate SSDI and reduce benefits until the employee proves they applied.
Three more things employees don’t know
- Most group benefits are taxable. Employer-paid benefits can leave employees with roughly half their regular pay after tax.
- Variable pay often isn’t covered. Employees who rely on overtime, commissions, or bonuses may find those excluded.
- High earners hit the cap. Monthly maximums limit benefits for executives and business owners.
These findings echo research by The American College on employer disability benefits. See why 60% group coverage can feel like a 58% pay cut.
How individual coverage fills the gap
Individual disability insurance generally isn’t reduced by Social Security benefits, can cover variable income, is portable if the client changes jobs, and pays benefits free of income tax when premiums are paid personally. Layering it on group coverage restores meaningful replacement.
Frequently asked questions
Does Social Security disability reduce group LTD benefits?
In most group plans, yes. The group benefit is reduced by the amount of Social Security disability the person receives.
Does individual disability insurance have a Social Security offset?
Generally no for the base benefit, although some optional riders coordinate with Social Security.
Why is group disability coverage often not enough?
Offsets, taxes, benefit caps, and exclusions for bonuses or commissions can all reduce what employees actually receive.
Reviewed by Tim Fuller on 2026-09-25
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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