Designed to replace lost income when an employee is unable to work for an extended period of time, business owners have a choice to provide coverage to all employees as part of an employer-paid core benefit or make the program optional and employee paid, often as part of the company’s voluntary benefits portfolio. However, most insurance companies require a minimum level of participation when underwriting an LTD plan, providing an incentive for employers to automatically enroll all employees in the plan and make it a 100% employer paid benefit.
It should be noted that the upside for employees paying for
the program with after-tax dollars or paying through a voluntary program is
that if they become disabled and receive benefits, the payments will be
tax-free.
LTD plans typically have a waiting period of 90 or 180 days, pay 50-60% of the disabled employee’s monthly income up to a stated maximum length of time, based on a very specific definition of “disability”. The carrier may or may not include commissions and bonuses in an employee’s income. Of particular importance is the carrier’s definition of disability. The most liberal definition of the term is “own occupation”, which allows the employee to collect benefits if they are unable to work due to illness or injury, in their current profession. On the other end of the spectrum is a definition requiring an inability to work in “any occupation”, making it much more difficult for the employee to collect benefits.
The pricing for the benefit program is based on the level of benefits provided, and the demographics of the company’s workforce, among other factors. Larger companies and those with prior coverage will usually be required to submit past rate history or utilization information.
For the business owner, it is worth shopping carriers on a
regular basis to compare not only pricing but the specific benefits offered by
each insurance company, including any exclusions and limitations. Brokers
and benefit consultants typically know the best carriers in each region for
various industries and can more effectively shop and compare programs for the
business owner or designated benefit manager.
The Lower Bucks County Chamber of
Commerce offers its members access to My Benefit Advisor as a solution for
employee benefits, including voluntary offerings. For more information about My
Benefit Advisor, visit our website at lbccc.mybenefitadvisor.com or contact
Marlon Richardson at (215) 790-3640.
