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Company changed disability insurance plan after man is disabled

Many Milwaukee area residents participate in their employers' long-term disability plans as a part of standard employee benefits packages. Other Wisconsin residents may have purchased their own disability benefits policies from insurance companies. People invest in such insurance coverage because it is important to have a lifeline in place should one become disabled before retirement.

In a recent case that took place in Indiana, a man who had been receiving disability benefits under an employer plan since 1990 suddenly found that his benefits would be canceled because the employer amended its long-term disability insurance plan. Is this legal?

The man was approved for permanent work-related disability benefits in 1990 under his employer plan that was governed by the Employee Retirement Income Security Act. Eleven years later, he was shifted to an occupational disability benefit, which was to be paid until he reached an early retirement age.

Three years after that, the plan was changed to eliminate occupational disability benefit payments that began before 2005. The date that the benefits would be terminated was six years before the man was to reach early retirement age, at which time his benefits had been scheduled to stop.

The benefit plan itself read that any amendments to the plan could be enforced retroactively, but the man was able to sue the company successfully in court. However, the plan's trustees appealed and the 6th Circuit appeals court ultimately ruled in favor of the plan's trustees.

One judge wrote a dissenting opinion, noting that people choose to participate in disability plans for the sole purpose of having a safety net in the event they become disabled--so, if a plan can terminate benefits once one is disabled, such plans really do not provide a safety net at all.

While this case has not worked out for the man who was denied benefits, it remains very important for people to seek legal counsel if they are denied disability benefits for disputed reasons. It is possible to fight the denial of benefits and win, but each case is unique and legal counsel is critical.

Source: HR.BLR.com, "ERISA: Can disability benefits be changed retroactively?" March 5, 2013

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