Depending on the terms of the disability insurance policy that applies to you, if reducing your work hours to part-time hours becomes the extent of your revised job, any future claim for short term and long term disability benefits may be limited by the reduced hours and pay the modified or new job entails.

When you have worked hard to get to a certain level at work and you are dealing with a disabling medical condition, it is hard to consider applying for disability benefits and to give up the career or job that you love, not to mention the income you and your family have come to rely upon. So, one option is to consider your work hours. Working less hours with your employer’s permission to see if you can maintain your job by working a little bit less.

This strategy may work out fine for some people and it may be preferable to going onto a disability claim, and all that goes along with that, but, a word of caution is required about the potential impact of reducing hours and how this may impact you later on if you find that you can’t continue even the part-time work.

Impact of reduction in work hours

Let’s say you have a job that pays you $50,000 a year for a 40 hour work week. Due to a medical condition you reduce your hours to 20 hours per week. You also have your salary reduced by ½ to $25,000.00 a year. If this new scenario becomes permanent, and you need to claim disability benefits in the future, your STD/LTD benefits may also be reduced. Let’s say your LTD plan entitles you to 60% of base salary per month. A $50,000.00 salary translates into a monthly gross salary of $4,166.67 and an LTD benefit of $2,500.00. If your revised salary becomes $25,000, your revised LTD would become $1,250.00.

You might say, but I only reduced my hours because of a disabling medical condition. Shouldn’t I be entitled to the full benefit based on my former salary? The answer lies in the specific wording of your policy. However, if the new part-time arrangement goes on for a extensive period of time, and essentially becomes your new job, then your LTD benefits would like be reduced.

On a cautionary note, many group benefit plans have a minimum hours per week requirement to be able to participate in the benefits. Very often the threshold for participation is 24 hours or greater per week. In the above example, if the hours requirement was 24 hours, you would not be entitled to receive any LTD benefits because the new hours worked is only 20 hours per week.

Bottom line

Be sure you understand your entitlements and how your policy works. It's important you understand this before making decisions based on what you think you may be entitled to if you are unable to continue working in the future. Unfortunately, it is rarely as simple as it seems or should be.

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