Take for example the All Source Maximum (ASM), which dictates that the maximum income a disabled plan member can receive from all sources is 85% of net monthly income. This is a good thing, as it provides an incentive for someone to return to work if they are able, after all, who would go back if you could get 100% of your net income.
Where things can go off the rails is the formula adopted as part of the plan design used to calculate a plan member LTD payment. Formula's are typically either a flat percentage of income or a graded scale, both designed to replace approximately 2/3rds of someone income.
For this example we'll focus or graded formula's, Here's a typical LTD formula: 67% of first $2250 of earnings, 50% of the next $3,500 and 40% of any excess maximum of $4,000/mo.
If we apply this calculation to someone earning $47,000, we would find their net income every month is $3126 the government imposed ASM is $2,657. Based on the formula above the individual would receive $2,334/mo well below the 85% maximum.
Now let's assume your advisor pays attention to the details and makes a suggestion to modify the formula by which LTD payments are calculated, perhaps like this: 67% if first $4,000 of earnings, 50% of the next $5,000 and 40% of excess maximum $4,000/mo. If you apply this formula to the income earner described above, their LTD payment would be $2,612/mo getting the member closer to their 85% maximum. In this case putting $278 more income in their pocket each month.
While a change like this may seem small, if you were disabled the extra income could mean the difference between being able to make the car payment or putting food on the table.
Choosing the right plan is as important as choosing the right advisor, pay attention to the small details.