Clients need help filing Social Security disability claims

The backlog for appealing an adverse decision before an administrative law judge averages 605 days

Dec 27, 2017 @ 11:30 am

By Mary Beth Franklin

When financial advisers discuss Social Security benefits, it is usually in the context of counseling clients when to claim retirement benefits and the impact of that decision on the amount of survivor benefits for the remaining spouse.

But one of the Social Security program's most valuable features is disability benefits that are paid to workers and their dependent family members when they are too sick or injured to work.

Yet many advisers are at a loss when it comes to guiding a client through the disability application labyrinth. That's when it's time to call in the pros.

DISABLED CLIENT

One adviser contacted me recently about his client that is now a quadriplegic following a car accident several years ago. The client receives 24-hour care at home at enormous expense. But it never occurred to the family — or the adviser — to apply for Social Security disability benefits. The issue only came up when the adviser tried to help the couple apply for Medicare at age 65.

"I hear people all the time talking about not wanting to apply for a handout," said Mike Stein, assistant vice president at Allsup, an Illinois-based firm that represents people filing for disability claims. "It's unfortunate that there is a stigma attached to it," he said, noting that workers have paid for these benefits through their payroll taxes over their entire career. "It's like paying car insurance premiums for 20 years but never submitting a claim when you have an accident."

More than 10.6 million people — including 8.8 million disabled workers and their 1.8 million family members — receive Social Security disability benefits. That represents about 16% of total Social Security beneficiaries. Nearly 90% of American workers under age 64 in covered employment are protected in the event of a severe and prolonged disability. The average Social Security disability benefit in 2017 is about $1,200 per month.

The Social Security Administration estimates that one in four 20-year-olds will be disabled before their full retirement age of 67 and two-thirds of the private-sector workforce has no private long-term disability insurance.

Given how a severe disability or terminal illness could disrupt a family's carefully laid financial plans, it would be wise for financial advisers to develop a list of resources where they can refer clients for help should the need arise.

LENGTHY PROCESS

Applying for Social Security is a lengthy and difficult process. In general, an applicant must meet two different earnings tests: A recent work test, based on age at the time of disability; and a duration of work test to show that the individual worked long enough under Social Security to qualify for benefits. For workers age 31 or older, they must have worked five out of the 10 years before their disability began. Younger workers face a less stringent duration test.

After filing an initial application, most workers wait four to six months for a response and Social Security denies two out of three requests, meaning many legitimately disabled people are denied benefits. Applicants have 60 days to appeal. Social Security then takes another look at the case. This step usually takes three to five months and the approval rate hovers around 20%.

At that point, an applicant can appeal an adverse decision before an administrative law judge. There is a backlog of more than 1 million pending cases. The average wait at the hearing level — for people who have already been denied benefits twice — is 605 days.

In 2008, Social Security implemented the Compassionate Allowance initiative (CAL) to fast-track individuals with certain conditions through the disability determination process by prioritizing their disability claims. Since then, Social Security has expanded its list of CAL conditions from 50 to 225.

IMPROVEMENTS NEEDED

But the U.S. Government Accountability Office (GAO) recently found that the Social Security Administration needs to develop a better method for handling the CAL initiative. Many disabling conditions are overlooked, which means these deserving applicants' claims are not expedited and they end up stuck in the lengthy backlog of Americans waiting for hearings.

Due to a lack of accuracy and consistency in the process, a simple typo in an application can cause it to not be flagged as a compassionate allowance at all, even for a condition on the approved list, Mr. Stein explained.

"I encourage people to file for disability benefits as soon as they become disabled and get an expert involved early," Mr. Stein said. "The sooner you get in line, the sooner you get to the front of the line."

Firms such as Allsup are paid on a contingency basis only if the client is awarded disability benefits. Fees are regulated at the federal level. The standard fee is 25% of past-due benefits, not to exceed $6,000.

Allsup offers a free online assessment tool for Social Security Disability Insurance eligibility and will flag individuals who qualify under the Compassionate Allowance program.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Upcoming Event

Mar 13

Conference

WOMEN to WATCH

InvestmentNews is honoring female financial advisers and industry executives who are distinguished leaders at their firms. These women have advanced the business of providing advice through their passion, creativity, inclusive approach and... Learn more

Featured video

INTV

Advisers beware: tax law has unintended consequences

Commission accounts could be preferable for some clients, and advisers could be incentivized to move from employee broker-dealers to independent channels.

Recommended Video

Path to growth

Latest news & opinion

Bond investors have more to worry about than a government shutdown

Inflation worries, international rates pushing Treasuries yields higher.

State measures to prevent elder financial abuse gaining steam

A growing number of states are looking to pass rules preventing exploitation of seniors.

Morgan Stanley reports a loss of advisers after exiting the protocol for broker recruiting

The firm said it lost 47 brokers in the fourth quarter, the most in any quarter of 2017.

Morgan Stanley's wealth management fees climb to all-time high

Improvement reflect firm's shift of more clients into fee-based accounts priced on asset levels, which boosts results as markets rise.

Legislation would make it harder for investors to sue mutual funds over high fees

A plaintiff would have to state in their initial complaint why fiduciary duty was breached, and then prove the violation with 'clear and convincing evidence.'

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print