How Offset Is Calculated
Understanding the LTD offset calculation
Last updated: May 2026
How the LTD Offset Is Calculated
For complete details on all offset types (CA SDI, SSDI with 70% rule, and outside income), see the comprehensive LTD Offsets guide. This page covers the SDI offset math.
You pay California SDI tax on your full earnings. But the administrator reduces your LTD by that same SDI amount. You're effectively paying for a benefit that doesn't increase your total income.
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: $7,642/month
Net LTD payment: $9,858/month
Total monthly income: $17,500/month
The total is the same whether you receive SDI or not. This is the offset problem.
What Counts as Offset Income
The administrator offsets your LTD benefit by:
| Income Source | Offset? |
|---|---|
| California SDI | Yes |
| Social Security Disability | Yes (70% rule — see Offsets guide) |
| 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 401(a)(17) limit for 2026)
- SDI weekly max: $1,765 (2026)
Monthly Calculation:
| Line Item | Amount |
|---|---|
| Earnings (capped at $350K) | $350,000/year |
| LTD rate (months 1–24) | 60% |
| Gross annual LTD | $210,000 |
| Gross monthly LTD | $17,500 |
| SDI monthly (max) | $7,642 |
| Net LTD payment | $9,858 |
What You Receive:
- From SDI: $7,642/month
- From Hartford: $9,858/month
- Total: $17,500/month
What If You Didn't Get SDI?
Without SDI:
- From SDI: $0
- From Hartford: $17,500/month
- Total: $17,500/month
Whether you receive SDI or not, your total income is the same. But you're still paying SDI tax — that's money you'll never see additional benefit from.
The SDI Tax Cost
2026 SDI Tax:
- Rate: 1.3% (uncapped)
- On $400,000 earnings: $5,200/year in tax paid
- Net benefit from SDI due to offset: $0
Policy Language
The plan document typically states:
"Monthly benefit will be reduced by Other Income Benefits, including but not limited to state disability benefits..."
Request your complete plan document to review the exact offset provisions — the specific language controls if there is a dispute.
Disputing an Incorrect Offset
The offset is a plan provision, but the administrator must use the correct SDI amount. Common errors:
- Wrong SDI amount used (estimated maximum vs. actual approved amount)
- Offset applied before your LTD eligibility date
- SDI offset continued after your 52-week EDD exhaustion
If you believe there's an error:
- Request the calculation in writing, including the SDI figure used
- Compare to your EDD approval letter and payment records
- Submit a written dispute with supporting documents
- Escalate through the PBRB if the administrator does not correct it
Timing of Offsets
Months 1-6: SDI only (no LTD yet — nothing to offset from)
Months 7-12: LTD begins; full CA SDI offset applied each month
Month 13+: SDI exhausts at 52 weeks; offset ends; full LTD amount paid
Month 25+: LTD rate drops from 60% to 50%; new gross baseline
Next Steps
- Calculator — Calculate your specific situation
- Appealing Hartford Decisions — If you need to dispute
- PBRB Process — Pilot Benefit Review Board option