How Offset Is Calculated
Understanding the LTD offset calculation
How the LTD Offset Is Calculated
Understanding the offset calculation is crucial for knowing what you'll actually receive.
The Basic Concept
The LTD administrator reduces your LTD payment by the amount of "other income" you receive, including SDI.
Step-by-Step Calculation
Step 1: Calculate Gross LTD Benefit
Pre-disability earnings: $350,000 (capped at IRS limit)
LTD percentage: 60% (first 24 months)
Gross monthly LTD: $350,000 × 60% ÷ 12 = $17,500
Note: Percentage drops to 50% after 24 months. See Benefit Calculation for details.
Step 2: Determine SDI Weekly Benefit
Highest quarterly earnings: $87,500
Weekly benefit: ~60-70% of highest weekly wage
Maximum weekly SDI: $1,765 (2026)
Monthly SDI: $1,765 × 4.33 = ~$7,642
Step 3: Apply the Offset
Gross LTD benefit: $17,500/month
Less: SDI offset: -$7,642/month
Net LTD payment: $9,858/month
Your Total Income
SDI payment: $7,015/month
Net LTD payment: $12,431/month
Total monthly income: $19,446/month
The total is the same whether you receive SDI or not. This is the offset problem.
What Counts as Offset Income
Hartford offsets your LTD benefit by:
| Income Source | Offset? |
|---|---|
| California SDI | Yes |
| Social Security Disability | Yes |
| Workers' Compensation | Yes |
| Other state disability | Yes |
| Retirement pension | Sometimes |
| Investment income | No |
| Spouse's income | No |
Detailed Offset Example
Pilot Scenario
Assumptions:
- Annual earnings: $400,000
- LTD cap: $350,000 (IRS limit)
- SDI weekly max: $1,620 (2026)
Monthly Calculation:
| Line Item | Amount |
|---|---|
| Earnings (capped at $350K) | $350,000/year |
| LTD rate | 66.67% |
| Gross annual LTD | $233,345 |
| Gross monthly LTD | $19,446 |
| SDI monthly (max) | $7,015 |
| Net LTD payment | $12,431 |
What You Receive:
- From SDI: $7,015/month
- From Hartford: $12,431/month
- Total: $19,446/month
What If You Didn't Get SDI?
Without SDI:
- From SDI: $0
- From Hartford: $19,446/month
- Total: $19,446/month
The SDI Tax Cost
What You Pay
2026 SDI Tax:
- Rate: 1.3% (uncapped)
- On $400,000 earnings: $5,200/year
What You "Get"
SDI Benefit:
- $7,015/month while disabled
- BUT: Hartford offsets this amount
Net Value: $0
You pay $5,200/year for SDI tax, but due to offset, it doesn't increase your actual disability income.
Policy Language
The Hartford policy typically states something like:
"Monthly benefit will be reduced by Other Income Benefits, including but not limited to state disability benefits..."
The specific language matters. Request your complete policy to review exact offset provisions.
Fighting the Offset
Options Are Limited
The offset is a policy provision, not a Hartford error. However:
- Verify the calculation - Ensure Hartford calculated correctly
- Check policy language - Look for any exceptions
- Consider PBRB - For calculation disputes
- Advocate for change - Through union for future policies
When Hartford Makes Errors
Hartford may miscalculate if:
- Wrong SDI amount used
- Incorrect timing of offset application
- Misunderstanding of when SDI pays
If you believe there's an error:
- Request detailed calculation
- Compare to actual SDI payments
- Dispute in writing
- Escalate as needed
Estimating Your Offset
Use our Calculator to estimate:
- Your expected SDI weekly benefit
- Your expected LTD monthly benefit
- The offset amount
- Your total expected income
Timing of Offsets
When Offsets Apply
During LTD elimination period (Days 1-180):
- No LTD payments
- No offset (nothing to offset from)
- SDI pays independently
After LTD begins (Day 181+):
- LTD payments begin
- Offset applies to each payment
- Monthly reconciliation may occur
If SDI Ends Before LTD
SDI maximum duration is typically 52 weeks. LTD can continue longer.
Months 1-12: SDI + LTD (offset applied)
Months 13+: LTD only (no offset, full LTD amount)
Next Steps
- Calculator - Calculate your specific situation
- Appealing Hartford Decisions - If you need to dispute
- PBRB Process - Pilot Benefit Review Board option