In Riley v. Sun Life and Health Insurance Co., No. 10-2850 (8th Cir. 2011), the sole question for the Eighth Circuit Court of Appeals (the “Court”) was whether Sun Life, the insurer and plan administrator of an employer sponsored long-term disability (“LTD”) benefits plan (the “Plan”), may offset the LTD benefits paid by the Plan to the plaintiff, James Riley (“Riley”), by the amount that Riley receives in Department of Veterans Affairs (“VA”) benefits. The district court upheld Sun Life’s decision to apply the offset.
Riley has multiple sclerosis (“MS”), and the parties do not dispute that he is entitled to monthly LTD benefits from the Plan. Also, Riley is a veteran of the Vietnam War and receives monthly VA benefits, under the Veteran’s Benefits Act (38 U.S.C. section 101, et seq.) (the “VBA”), because of his MS. The armed services regarded Riley’s MS as being a service-related disability contracted during a period of war. The Plan provides that monthly LTD benefits can be reduced by “other income,” defined by the Plan as any amount of disability or retirement benefits under (a) the United States Social Security Act (the “SSA”), (b) the Railroad Retirement Act (the “RRA”), or (c) any other similar act or law provided in any jurisdiction.
The Court said that, although Sun Life must have ultimately determined that the VBA was similar to the SSA and/or the RRA, so that Riley’s LTD benefits should be offset, the Court cannot find any evidence in the record that Sun Life undertook a meaningful analysis of the VBA in making this determination. Benefits under the VBA, for a wartime service-related disability, as a matter of statutory construction, do not derive from an act that is “similar to” the SSA or RRA. The SSA and RRA disability benefits programs are both federal insurance programs based upon employment, and the amount of an award under their terms depends upon how much has been paid in. Conversely, the VA benefits are not from an insurance program, but instead are considered obligatory compensation for injuries to service men and women during military duty. The VA benefits generally depend upon the extent of a veteran’s injury, and are unrelated to length of service, rank, or amount of pay received while serving. They are funded by Congress through a budget, not by a tax on service people.There are other differences between the VBA and the SSA and RRA. As such, the Court determined that the VA benefits are not “other income”, and should not offset Riley’s LTD benefits under the Plan.