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

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:

1. Calculate your expected CA SDI benefit
2. Offset that amount from your LTD
3. 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, provide the administrator with:

• Denial letter from EDD (removes the offset entirely)
• Approval letter showing actual benefit amount (corrects over-estimated offset)
• Payment history showing what you actually received
• Exhaustion notice once you've used all 52 weeks (offset ends at that point)

SSDI Offset (CBA Section 27.J.15)

The 70% Rule

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

This applies to disabilities that 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

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

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 until you are approved
• Once approved, offset begins from that date
• Retroactive SSDI triggers LTD overpayment recoupment — inform your LTD administrator when you apply so they can escrow the expected amount rather than collect it all at once

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.

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

1. Baseline includes your pre-disability outside income — a side business you had before disability raises the threshold, so it won't trigger an offset unless the business grows beyond pre-disability levels
2. Only the excess is offset, at 50% — you keep half of any amount above the baseline

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)

Reporting Requirements

You must report to the 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 and overpayment recoupment — undisclosed income discovered during an audit is treated as fraud under ERISA.

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:

1. CA SDI offset:

   Full offset: -$7,642
   

2. Outside income offset:

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

3. Net LTD:

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

4. 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

Challenging Incorrect Offsets

The offset is a plan provision — not an administrative error — so the only remedy is disputing the administrator's arithmetic or documentation assumptions.

1. Request the offset calculation in writing, including the SDI/SSDI amounts used
2. Compare to your actual EDD approval letter and payment history
3. Submit corrections in writing with supporting documents, referencing the specific CBA section
4. Escalate through the PBRB process if the administrator does not correct the calculation

Common Questions

Q: What if CA SDI denies my claim?

Provide the EDD denial letter to your LTD administrator immediately. They must remove the CA SDI offset.

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

Provide your EDD approval letter and payment history. The offset must equal actual CA SDI received, not the estimated maximum.

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

Yes, but you must still meet the disability definition. Part-time earnings feed the outside income offset calculation — report them monthly to avoid an overpayment demand at year-end.

Q: What about VA disability payments?

VA disability is typically NOT offset from LTD benefits — VA benefits compensate for service-connected disability and most plan documents exclude them. Confirm the treatment with your claims examiner at the start of your claim and get the answer in writing.

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