You already know that ERISA disability payments can often be reduced or offset by disability payments the beneficiary receives from the Social Security Administration.
Can the ERISA Plan offset Veterans Administration (VA) disability benefits as “other income?”
It depends on what the “other income” ERISA plan language says.
AND, courts may conclude the issue involves construing “existing law” and will endeavor to apply de novo review.
Here’s the case of Riley v. Sun Life and Health Insurance Co., __F.3d __ (8th Cir. October 7, 2011) (PDF) (VA benefits cannot be offset because they are not “similar to” ERISA long term disability benefits.) This case also gives a good road map how ERISA Plans should construct offset provisions.
FACTS: Riley had multiple sclerosis symptoms and sought ERISA disability benefits under his Employer’s ERISA qualified long term disability plan with Sun Life. He also received VA disability benefits from the Department of Veterans Affairs. The plan stated that offsets would apply to benefits received from Social Security Administration or the Railroad Retirement Act or “any other similar act or law provided in any jurisdiction.” Sun Life offset from the disability benefits amounts received for his VA disability benefits.
Riley sued contending Sun Life should not offset his VA disability benefits.
TRIAL COURT: Granted Defendant Sun Life summary judgment, concluding the offset of VA disability benefits was appropriate.
EIGHTH CIRCUIT COURT OF APPEALS: REVERSES and finds VA Disability benefits should not be offset.
1. The Court reviewed the decision de novo because the plan’s decision involved construction of existing law.
2. Some cases have allowed for an offset of VA disability benefits; some cases have not—depending on plan language.
–High v. E-Systems, Inc., 459 F.3d 573 (5th Cir. 2006) (broad plan language allowed VA disability benefits offset).
–Jones v. ReliaStar Life Insurance Co., 615 F.3d 941 (8th Cir. 2010) (upheld Plan’s decision to offset VA benefits because the plan language defined “other income” as income based on “the same or related disability for which [the plan participant is] eligible to receive benefits under the Group Policy.”)
–But see, Williams v. Group Long Term Disability Ins., 2008 WL 2788615 (N.D. Ill. July 17, 2008)(VA benefits cannot be offset because VA benefits are “different” and the language was not “clear [to the employer] at the outset” that VA benefits would be offset.)
3. KEY QUOTE: “We disagree with the Plan administrator’s decision to offset Riley’s VA benefits. Those benefits for a war-time service disability, as a matter of statutory construction, do not derive from an act that it “similar to ” [the Social Security Act (SSA) or the Railroad Retirement Act (RRA)].” The Court explains how SSA and RRA are not “similar” to long term disability benefits.
4. GOOD DISSENT:
-Discretionary review should have been applied: the issue does not involve construing an “existing law.” It deals with the meaning of plan terms.
-ERISA disability benefits are substantially similar to SSA and RRA disability benefits and should be offset.