okay I figured out that error. I had to have the disambiguation ID as samlsso. then it works.
But now it doesn't authorize the user upon login. policy server trace shows this.
[07/01/2015][20:05:04.620][20:05:04][4876][4560][IsAuthorized.cpp:688][CSm_Az_Message::IsAuthorized][2060f4d7-a82cf3bc-6440db26-c6e402b0-ddbcb6f2-f85][WSFEDrp:office365][][agrao][][wsfedrp:office365_az][wsfedrp:office365][][][][][][][][][][][][][][Authorizing user...]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1409][CSmAz::IsOk][][][][][][][][][][][][][][][][][][][][][Enter function CSmAz::IsOk]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1447][CSmAz::IsOk][][][][agrao][][wsfedrp:office365_az][wsfedrp:office365][][][][][][][][][][][][][][Start of user policy analysis for realm.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1545][CSmAz::IsOk][][][][][][][wsfedrp:office365][][wsfedrp:office365][][][][][][][][][][][][Check the Policy.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1588][CSmAz::IsOk][][][][][][][wsfedrp:office365][][][][wsfedrp:office365_az][][][][][][][][][][Check the Rule]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:666][CSmAz::TestRule][][][][][][][][][][][][][][][][][][][][][Enter function CSmAz::TestRule]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:771][CSmAz::TestRule][][][][][][][][][][][][][true][][][][][][][][Leave function CSmAz::TestRule]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:778][CSmAz::TestPolicy][][][][][][][][][][][][][][][][][][][][][Enter function CSmAz::TestPolicy]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:797][CSmAz::TestPolicy][][][][][][][wsfedrp:office365][][wsfedrp:office365][][][][][][][][][][][][Evaluating policy...]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:812][CSmAz::TestPolicy][][][][][][][wsfedrp:office365][][wsfedrp:office365][][][][][][][][][][][][Policy is blocked by time]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:814][CSmAz::TestPolicy][][][][][][][][][][][][][false][][][][][][][][Leave function CSmAz::TestPolicy]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1731][CSmAz::IsOk][][][][][][][wsfedrp:office365][][wsfedrp:office365][][wsfedrp:office365_az][][][][][][][][][][Policy is not applicable. Skipped.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1862][CSmAz::IsOk][][][][][][][][][][][][][][No applicable Policy found. ][][][][][][][IsOk? No.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1864][CSmAz::IsOk][][][][][][][][][][][][][false][][][][][][][][Leave function CSmAz::IsOk]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][IsAuthorized.cpp:1047][CSm_Az_Message::InitAuthUser][][][][][][][][][][][][][][][][][][][][][Enter function CSm_Az_Message::InitAuthUser]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][IsAuthorized.cpp:1068][CSm_Az_Message::InitAuthUser][][][][][][][][][][][][][true][][][][][][][][Leave function CSm_Az_Message::InitAuthUser]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][IsAuthorized.cpp:945][CSm_Az_Message::IsAuthorized][s5/r4][WSFEDrp:office365][][agrao][][wsfedrp:office365_az][wsfedrp:office365][][][][][][][][][][][][][][Evaluating OnAccessReject policy in the realm.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1409][CSmAz::IsOk][][][][][][][][][][][][][][][][][][][][][Enter function CSmAz::IsOk]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1447][CSmAz::IsOk][][][][agrao][][wsfedrp:office365_az][wsfedrp:office365][][][][][][][][][][][][][][Start of user policy analysis for realm.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1862][CSmAz::IsOk][][][][][][][][][][][][][][No applicable Policy found. ][][][][][][][IsOk? No.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1864][CSmAz::IsOk][][][][][][][][][][][][][false][][][][][][][][Leave function CSmAz::IsOk]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:2311][CSmAz::IsOkGlobal][][][][][][][][][][][][][][][][][][][][][Enter function CSmAz::IsOkGlobal]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:2333][CSmAz::IsOkGlobal][][][][agrao][][wsfedrp:office365_az][wsfedrp:office365][][][][][][][][][][][][][][Evaluating OnAccessReject global policies in the realm.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1409][CSmAz::IsOk][][][][][][][][][][][][][][][][][][][][][Enter function CSmAz::IsOk]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1447][CSmAz::IsOk][][][][agrao][][wsfedrp:office365_az][wsfedrp:office365][][][][][][][][][][][][][][Start of user policy analysis for realm.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1862][CSmAz::IsOk][][][][][][][][][][][][][][No applicable Policy found. ][][][][][][][IsOk? No.]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:1864][CSmAz::IsOk][][][][][][][][][][][][][false][][][][][][][][Leave function CSmAz::IsOk]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthorization.cpp:2347][CSmAz::IsOkGlobal][][][][][][][][][][][][][false][][][][][][][][Leave function CSmAz::IsOkGlobal]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][Sm_Az_Message.cpp:406][CSm_Az_Message::SendReply][][][][][][][][][][][][][][][][][][][][][Enter function CSm_Az_Message::SendReply]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthAnon.cpp:44][SmAuthQuery][][][][][][][][][][][][][][][][][][][][][Enter function SmAuthQuery]
[07/01/2015][20:05:04.620][20:05:04][4876][4560][SmAuthAnon.cpp:63][SmAuthQuery][][][][][][][][][][][][][Sm_AuthApi_Success][][][][][][][][Leave function SmAuthQuery]
any idea?
Regards,
Anand.