LTD Benefit Offsets

Understanding how CA SDI, SSDI, and outside income affect your LTD benefits

Last updated: 2026-01-11

LTD Benefit Offsets

Your gross LTD benefit is reduced by other income sources. Understanding these offset rules is critical for accurate financial planning.

Overview of Offsets

Your net LTD payment equals:

Gross LTD Benefit
  - CA SDI offset
  - SSDI offset (70% rule)
  - Outside income offset (if applicable)
  = Net LTD Payment

Each offset type has different rules. Let's explore each one.

CA SDI Offset

Basic Rule

CA SDI is fully offset from your LTD benefit.

Example:

Gross LTD:      $9,000/month
CA SDI:         $1,765/week × 4.33 = $7,642/month
Net LTD:        $9,000 - $7,642 = $1,358/month

Critical Problem: The Offset Paradox

See the Offset Problem guide for a complete explanation of why CA pilots face a unique financial trap.

Key points:

CA SDI is offset whether or not you've received payment
LTD administrator uses expected CA SDI, not actual
EDD delays mean you may get neither full SDI nor full LTD
This is the core problem this guide helps you navigate

When CA SDI Offset Applies

Immediately upon LTD eligibility, the administrator will:

Calculate your expected CA SDI benefit
Offset that amount from your LTD
This happens even if:
- You haven't filed for CA SDI yet
- Your CA SDI claim is pending
- EDD denied your claim
- You never receive CA SDI

Proving CA SDI Status

To reduce or eliminate the CA SDI offset, you must provide:

Denial letter from EDD (if denied)
Approval letter showing actual benefit amount
Payment history showing what you actually received
Exhaustion notice if you've used all 52 weeks

Without documentation from EDD, the administrator will assume maximum CA SDI and offset accordingly.

SSDI Offset (CBA Section 27.J.15)

The 70% Rule

Only 70% of your SSDI is offset, not 100%.

This is a significant benefit to pilots whose disability began after October 30, 2006.

Example:

Your SSDI benefit:    $3,000/month
Amount offset:        $3,000 × 70% = $2,100/month
You effectively keep: $3,000 × 30% = $900/month "free"

Why This Matters

If you're receiving both LTD and SSDI:

Without 70% rule (100% offset):

Gross LTD:    $9,000
SSDI offset:  -$3,000 (100%)
Net benefit:  $6,000
Total income: $6,000 + $3,000 = $9,000

With 70% rule (actual):

Gross LTD:    $9,000
SSDI offset:  -$2,100 (70%)
Net LTD:      $6,900
Total income: $6,900 + $3,000 = $9,900

You keep an extra $900/month.

Family Benefits Excluded

If SSDI pays additional amounts for your dependents:

Spouse benefits: NOT offset
Children benefits: NOT offset
Only YOUR benefit is subject to the 70% offset

Example:

SSDI breakdown:
  - Your benefit:     $3,000/month
  - Spouse benefit:   $800/month
  - 2 children:       $600/month each
  - Total SSDI:       $5,000/month

LTD offset calculation:
  - Only your $3,000 is considered
  - 70% offset = $3,000 × 0.70 = $2,100
  - Family benefits ($2,000) = ZERO offset

Total income:
  - LTD: $9,000 - $2,100 = $6,900
  - SSDI: $5,000
  - Total: $11,900/month

Legacy Exception

Disabilities before October 30, 2006:

100% offset applies (old rule)
No family benefit exclusion

If your disability began before this date, the entire SSDI amount is offset.

SSDI Application Timeline

SSDI typically takes:

3-6 months for initial decision
12-24 months if appeals are needed
Retroactive payments when approved

During SSDI application:

LTD will not offset SSDI (you haven't been approved yet)
Once approved, offset begins
Retroactive SSDI may require you to repay LTD overpayments

Inform your LTD administrator when you apply for SSDI. This helps prevent overpayment issues later.

Outside Income Offset (CBA Section 27.J.13)

The Threshold Rule

Outside income is only offset if your total income exceeds your pre-disability total income.

This is a very favorable rule for pilots with side businesses.

Pre-Disability Income Includes Outside Income

Your baseline is:

FedEx pre-disability earnings
PLUS any outside income you had before disability
Averaged over 12 months

The 50% Excess Rule

When your current total income exceeds your pre-disability total:

Offset = 50% of the excess
NOT 100% of your outside income

Example 1: No Offset

Pre-disability (12-month average):

FedEx income:      $100,000/year = $8,333/month
Side business:     $25,000/year  = $2,083/month
Total baseline:    $125,000/year = $10,416/month

While on LTD:

LTD benefit:       $5,000/month
Side business:     $4,000/month (business continues)
Current total:     $9,000/month

Offset calculation:

Current total:     $9,000/month
Baseline:          $10,416/month
Excess:            $0 (current is less than baseline)
Offset:            $0

Result: No offset. You keep full LTD and all outside income.

Example 2: With Offset

Same pre-disability baseline: $10,416/month

While on LTD (business grows):

LTD benefit:       $5,000/month
Side business:     $7,000/month (business grew)
Current total:     $12,000/month

Offset calculation:

Current total:     $12,000/month
Baseline:          $10,416/month
Excess:            $1,584/month
Offset:            $1,584 × 50% = $792/month

Net LTD payment:

Gross LTD:         $5,000
Outside offset:    -$792
Net LTD:           $4,208

Total income:

Net LTD:           $4,208
Side business:     $7,000
Total:             $11,208/month

Key Points

Baseline includes your outside income - Don't abandon your side business thinking it will hurt you
Only excess is offset - Not your full outside income
50% rate - You keep half of any excess
Encourages productivity - System rewards working when able

What Counts as Outside Income

Included:

Self-employment income
Consulting fees
Business profits
Rental income (active involvement)
Part-time employment

Typically excluded:

Passive investment income
Capital gains
Rental income (passive)
Inheritance
VA disability (separate rules)

Documentation Requirements

You must report to LTD administrator:

All sources of outside income
Monthly or annual amounts
Business tax returns if self-employed
1099 forms for contract work

Failure to report:

May result in benefit suspension
May require repayment of overpayments
May be considered fraud

Combined Offset Example

High-Earning Captain with Multiple Income Sources

Pre-disability:

FedEx income:      $300,000/year = $25,000/month
Real estate:       $36,000/year  = $3,000/month
Total baseline:    $28,000/month

Month 10 of disability:

Gross LTD:         $16,800/month (60% of $28,000)
CA SDI:            $7,642/month (expected)
SSDI:              Not yet approved
Real estate:       $3,000/month (continues)

Offset calculations:

CA SDI offset:
```
Full offset: -$7,642
```

Outside income offset:

Current LTD + real estate: $16,800 + $3,000 = $19,800
Baseline: $28,000
Excess: $0 (current < baseline)
Offset: $0

Net LTD:

Gross LTD:           $16,800
CA SDI offset:       -$7,642
Outside offset:      -$0
Net LTD:             $9,158

Total income:

Net LTD:             $9,158
Real estate:         $3,000
Total:               $12,158/month

Later (Month 16), SSDI approved retroactively:

SSDI approved:       $3,500/month (pilot portion)
SSDI family:         $1,200/month (spouse + children)

New offset calculation:

CA SDI offset:       -$7,642 (if still within 52 weeks)
SSDI offset:         -$2,450 ($3,500 × 70%)
Outside offset:      -$0 (still below baseline)

Net LTD:             $16,800 - $7,642 - $2,450 = $6,708

Total income:
  Net LTD:           $6,708
  SSDI (total):      $4,700 ($3,500 + $1,200)
  Real estate:       $3,000
  Total:             $14,408/month

Strategies for Managing Offsets

1. File CA SDI Promptly

Minimizes the "neither SDI nor LTD" gap
Documents your actual benefit amount
Provides proof for offset calculation

2. Apply for SSDI Early

Long approval process
70% offset is favorable
Family benefits not offset

3. Maintain Outside Income Records

Document pre-disability income carefully
Keep 12 months of records before disability
Report all income honestly to avoid problems

4. Understand the Timeline

Months 1-6:    CA SDI only (if approved), no LTD yet
Month 7-12:    LTD begins, CA SDI continues, full CA SDI offset
Month 13+:     CA SDI exhausted (52 weeks), only LTD
               SSDI approved, 70% SSDI offset begins
Month 25+:     LTD drops to 50%, lower gross benefit

5. Challenge Incorrect Offsets

If you believe an offset is calculated incorrectly:

Request detailed calculation in writing
Provide documentation supporting your position
Reference specific CBA sections
Use PBRB process if needed

Common Questions

Q: What if CA SDI denies my claim?

Provide the denial letter to your LTD administrator. They should remove or reduce the CA SDI offset.

Q: What if I receive less CA SDI than expected?

Provide your approval letter and payment history. The offset should be based on actual CA SDI received, not estimated maximum.

Q: Can I work part-time while on LTD?

Yes, but:

Must still meet disability definition
Income affects outside income offset
Coordinate with both EDD and LTD administrator

Q: What about VA disability payments?

VA disability is typically NOT offset from LTD benefits because:

VA benefits are compensation for service-connected disabilities
They are not "disability income" in the traditional sense
Most LTD plans exclude VA benefits from offsets

However:

Verify with your specific LTD administrator
Review your actual plan documents
VA benefits may affect SSDI eligibility/amount
Some plans have specific VA offset provisions

Action: Contact your LTD administrator at the start of your claim to confirm VA benefit treatment.

Next Steps

Understand cooperation requirements - What's required to maintain benefits
Learn about duration limits - How long benefits last
Calculate your net benefit - Use the calculator

Keep detailed records of all income sources and communications with benefit administrators. Accurate documentation prevents offset disputes and overpayment issues.