Can You Work Another Job While on Long-Term Disability?

Long-term disability (LTD) benefits provide financial support when a qualifying illness or injury prevents an individual from working. The decision to work another job while on long-term disability is complex, with feasibility and implications largely dependent on the specific terms of the disability insurance policy and the nature of the intended work.

Understanding Policy Terms and Conditions

Long-term disability policies are not uniform; they originate from various sources, including employer-sponsored group plans and individual policies purchased privately. Each policy contains specific language that defines disability and outlines conditions for receiving benefits. The precise wording within a policy is paramount, as it dictates how any additional work might be viewed by the insurer.

A fundamental distinction in policies is between an “own occupation” and “any occupation” definition of disability. An “own occupation” policy typically defines disability as the inability to perform the substantial duties of your specific job at the time the disability began. Under this definition, an individual might be able to work in a different capacity or profession that does not align with their former role, potentially without immediately forfeiting benefits. In contrast, an “any occupation” definition considers an individual disabled if they cannot perform the duties of any occupation for which they are reasonably suited by education, training, or experience. This broader definition often makes it more challenging to engage in any form of work without impacting benefits.

Many policies also include partial disability or residual disability clauses, which are designed to support a gradual return to work. These provisions allow individuals to work part-time or in a reduced capacity while still receiving a portion of their disability benefits. For instance, a residual disability clause might pay a percentage of benefits based on the percentage of income lost due to the disability, even if some work is performed. These clauses aim to bridge the gap between full disability and a complete return to work.

Some long-term disability policies feature return-to-work incentives. These incentives are structured to encourage claimants to attempt working again by providing continued, albeit often reduced, benefits for a period. Such provisions can include trial work periods or rehabilitation clauses, which allow for a temporary period of employment to assess an individual’s ability to work without immediately terminating benefits. Policy exclusions and limitations also exist, which might restrict earning income from certain types of work or beyond specific thresholds.

How Earnings Affect Benefits

Earning income from another job while receiving long-term disability benefits almost always impacts the amount of benefits received. Most LTD policies contain offset provisions, which reduce the benefit payment based on the income earned from other sources. These provisions ensure that the combined total of disability benefits and new earnings does not exceed a certain percentage of the individual’s pre-disability income, or in some cases, the total pre-disability income itself.

Benefit reduction formulas vary by policy, but a common approach involves reducing the disability benefit dollar-for-dollar by the amount earned from the new employment. For example, if a policy pays $3,000 per month and an individual earns $1,000 from a new job, the disability benefit might be reduced to $2,000. Other policies may use a percentage-based formula, where benefits are reduced by a certain percentage of the new earnings, or they might calculate benefits to ensure that the total income (benefits plus earnings) does not exceed the pre-disability earnings.

Policies also establish termination thresholds, which specify a point at which long-term disability benefits will cease entirely. This threshold is often defined as earning more than a certain percentage of one’s pre-disability income, such as 80% or 100%. If new earnings, when combined with any partial benefits, surpass this specified percentage, the disability benefits will likely be terminated.

Working while on long-term disability can also affect Social Security Disability Insurance (SSDI) benefits. The Social Security Administration (SSA) uses a concept called Substantial Gainful Activity (SGA) to determine if an individual is engaged in significant work. For 2025, the SGA limit for non-blind individuals is $1,550 per month; earning above this amount can lead to a termination of SSDI benefits. While private LTD policies and SSDI have separate criteria, earning income from another job can potentially impact both benefit streams.

Notifying Your Insurer and Employer

Notifying your long-term disability insurer about any new employment or income earned is a contractual obligation. Policies generally require immediate notification of any change in work status or earnings while receiving benefits. Failing to provide this information can lead to severe consequences, as insurers rely on accurate updates to administer claims.

When reporting new employment, the insurer will likely require specific details. This includes the nature of the new job, the hours worked per week, the gross income earned, and a description of the job duties performed. They may also request pay stubs, tax documents, or other proof of earnings to verify the information provided.

The consequences of non-disclosure are significant and can include the suspension or termination of benefits. In such cases, the insurer may demand repayment of any overpaid benefits, which can amount to substantial sums. In more serious instances, intentional failure to disclose income or employment could lead to accusations of fraud, potentially resulting in legal action.

If your long-term disability policy is through a former employer, you might also have an obligation to notify them about new employment. This is particularly relevant if the new job is with a competitor or involves duties similar to your previous role. Understanding such obligations can help avoid potential conflicts or misunderstandings.

Steps to Take Before Working

Before starting any new employment while receiving long-term disability benefits, take several proactive steps. First, thoroughly review your specific long-term disability policy document. Re-read all clauses related to the definition of disability, partial or residual disability, return-to-work incentives, and how earnings affect benefits.

Next, contact your long-term disability insurer before commencing any new work. Clearly explain your intention to work and inquire how the planned employment will affect your specific policy and benefits. Obtain this clarification in writing, whether through email or a formal letter. This documentation is invaluable if any disputes arise later.

As you engage with the insurer, maintain detailed records of all communications. This includes dates and times of phone calls, names of representatives spoken to, summaries of discussions, and copies of all emails, letters, and documents exchanged. This documentation provides a clear timeline and evidence of your efforts to comply with policy terms, protecting you in case of misunderstandings or challenges regarding your benefits.

Seeking professional advice is also a prudent step. Consulting with an attorney specializing in disability law can provide clarity on your specific policy and legal obligations. A financial advisor can help you understand the full financial implications of working, including how new income might affect your overall financial plan and tax situation. Additionally, consider the potential impact on other benefits you may be receiving, such as health insurance from a former employer or state-provided assistance, as these might be tied to your disability status.