Long Term Disability Provider Wants Me to Repay Money I Needed to Avoid Foreclosure. – Mary

“Dear Steve,

I am 44 years old, permanently disabled from a brain tumor (5 surgeries and radiation). I receive SSD and private LTD in about equal amounts. My house went into foreclosure because last year, my medical expenses exceeded 19K, and for a while, I had to decide between paying for private health insurance (prior to medicare kicking in) or paying my mortgage. In order to get out of foreclosure, I cashed in my very small 401k ($15K) on a hardship basis. I received about $13K after withholding.

Now I am under re-review by my private LTD provider. On the form, it asks about other “income.” There is a specific question about “retirement or pension from…any former employer.” If I report my cashed-out 401k as “income,” and it is in fact counted as income, I will be forced to repay my LTD provider the entire amount since they were paying me and I received outside income (if I did). In other words, is my cashed-out 401k retirement income for the purposes of my LTD, and if so, is it the kind of income, which will be counted for offsetting?

Must I report to my long term private disability provider that I cashed out my 401k? Is my 401k money considered “retirement income,” which would offset my LTD?


Dear Mary,

I don’t have a clue.

But if you are a AARP member you might want to reach out to one of the experts there on these issues. Click here.

Please post your responses and follow-up messages to me on this in the comments section below.


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Steve Rhode
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1 thought on “Long Term Disability Provider Wants Me to Repay Money I Needed to Avoid Foreclosure. – Mary”

  1. 401k is not usually considered a form of retirement pay. On the questionnaire, usually they mean any pension benefits. Call your claim analyst and/or review your LTD policy. Under the definitions section, they usually outline “Other Income Benefits” and 401K proceeds are usually not included.


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