Can you work and qualify for disability insurance benefits at the same time? The simple answer is yes you can, but the issue is complicated and breaks down into two parts –
1) If you are not receiving disability insurance benefits, it is feasible to be working full time yet still be considered totally disabled.
2) If you are already receiving benefits, many policies permit you to work and continue receiving benefits, but the rules for doing so can be complex. Both issues are explained further below.
Working Full Time and Being Disabled at the Same Time
Numerous court decisions have recognized that a worker may be disabled yet continue working. In a ruling issued more than 60 years ago, Mabry v. Travelers Insurance Company, 193 F.2d 497 (5th Cir. 1952), the court explained:
Pinched by poverty, beset by adversity, driven by necessity, one may work to keep the wolf away from the door though not physically able to work; and, under the law in this case, the fact that the woman worked to earn her living did not prevent a jury from finding, from the evidence before it, that she was totally and permanently disabled even while working.
The same reasoning was applied in a later ruling, Hawkins v. First Union Corp. Long-Term Disability Plan, 326 F.3d 914, 918 (7th Cir. 2003), where a court pointed out that there was no “logical incompatibility between working full time and being disabled from working full time, but there is not. A desperate person might force himself to work despite an illness that everyone agreed was totally disabling.” The court concluded: “A disabled person should not be punished for heroic efforts to work by being held to have forfeited his entitlement to disability benefits should he stop working.”
More recently, in yet another court ruling, Mirocha v. Metro.Life Ins.Co., 56 F.Supp.3d 925 (N.D.Ill. 2014), the court rejected an insurance company’s argument that an employee was discharged for performance issues rather than due to his medical condition. The court recognized, “it is entirely possible that poor job performance could have resulted from limitations imposed by Mirocha’s medical condition.”
As these cases make clear, desperate people often continue working long after others may have succumbed to a serious illness or injury. Continuing to work under such circumstances does not automatically disqualify a worker from receiving disability benefits, though, and anyone in such a situation should not assume they are barred from recovering disability insurance benefits.
Working After Qualifying for Disability Insurance Benefits
Working after qualifying for benefits does not necessarily result in a benefit termination.
First of all, some individual disability income insurance policies explicitly state that if an insured is unable to perform the duties of their regular occupation, they can receive benefits even if they are working in another occupation. Such policies are growing increasingly rare, though.
Many individual disability income policies contain residual disability provisions that reduce benefits based on income received from working while disabled, and benefits are paid in accordance with the percentage of wage loss. Earning more than 80% of pre-disability earnings would likely result in a complete loss of benefits, but under most policies, there is no benefit reduction if earnings received from working while disabled amount to less than 20% of pre-disability earnings. Such policies also usually “index” pre-disability earnings by multiplying pre-disability earnings by each year’s consumer price index.
It is important to carefully review the disability insurance policy, though, because every policy is different. If the policy lacks benefits for residual or partial disability, it is possible that receipt of any earnings from working could result in disqualification from receiving benefits, although some court rulings have found that the work being performed after the onset of disability has to generate a wage comparable to pre-disability earnings. Many insurers use a threshold of 60% of pre-disability earnings before benefits are no longer payable.
Group disability policies typically contain a return-to-work incentive that allows someone receiving disability benefits to receive earnings for a period (typically one year) that, when added to the benefit amount payable, is less than pre-disability earnings. No benefit reduction occurs so long as earnings stay within that limit, but if earnings plus benefits exceed 100% of pre-disability income, benefits will be reduced. Furthermore, generating earnings of more than 80% of pre-disability income will usually disqualify the insured from continuing to receive benefits.
After the return-to-work incentive period expires, benefits are reduced based on work-related earnings either in proportion to the insured’s earnings loss or under a different formula. Some policies reduce benefits by 50% of the insured’s earnings.
It is Important to Consult an Attorney for Disability Claims and Earnings While Disabled
It should be evident from the discussion above that receipt of earnings while disabled can be complex. For anyone who is contemplating submitting a disability claim or is on claim but considering working, it is important to consult with an attorney who is knowledgeable and experienced in handling these issues to make sure you are receiving the correct advice and are not jeopardizing your entitlement to benefits.