Is it wrong to take an offset for Social Security benefits received by the children of a long term disability claimant? No, says a new decision.

Andjust because you reinstate benefits does not mean you have to provide Pannebecker payments…

Here’s the case of Jones v. Life Insurance of North America, 2016 WL 3257781 (N.D. Cal. June 14, 2016)(PDF).

FACTS: Jones worked for Merck and sought ERISA-governed long term disability benefits in 2001. The benefits were terminated in 2007 and Jones sued. Reinstatement was offered, but an offset was taken for dependent Social Security benefits (SSDI) received for her children.


  1. Under the plan terms, “any benefit payable under the Plan” is reduced by “Social Security benefits, effective at the time the Participant becomes entitled to benefits.” Op. at 3.
  2. Plaintiff argued that no offset should occur for SSDI benefits her children received because they were not yet born when Jones started getting benefits in 2001. “Plaintiff’s interpretation is nonsensical….’[A]s a practical matter, a participant continues to be eligible and entitled to benefits for each subsequent monthly or partial monthly period for which s/he is Totally Disabled.”  Op. at 13.
  3. Plaintiff also argued that her children are “entitled” to their dependent SSDI benefits. But the court noted: “[t]he plan defines Social Security benefits as including family benefits” and the dependent benefits are awarded here because of plaintiff’s disability. Also, the SSDI “family award notices” expressly designate Jones as the payee and authorize her to use the funds. Op. at 14.
  4. Mere reinstatement, without more evidence of erroneous claims handling, does not trigger Pannebecker. (The Ninth Circuit decision in Pannebecker requires payment of claims from the improper termination of benefits.) “While MetLife’s subsequent reinstatement of plaintiff’s LTD benefits implies the initial termination was a mistake, the court has no basis for a finding that MetLife was arbitrary or capricious in terminating plaintiff’s LTD benefits.”  Op. at 16. (Emph. added).