Short Term and Long Term Disability plans may be offered as company-paid or voluntary. Available Types include:
- Group Short Term Disability
- Voluntary Short Term Disability
- Long Term Disability
- Voluntary Long Term Disability.
Group STD and LTD plans
- Usually company pays 100% of cost and employees are required to enroll in plan
- Benefit structure is typically a fixed % of weekly earnings (STD) or monthly earnings (LTD)
- Only covers employees -- no dependents
- Usually has benefit reductions rules for older employees (benefit amount reduced by 50% at age 65)
Voluntary STD and LTD plans
- Coverage is optional and usually employee pays 100% of cost
- Some companies may offer to pay a % of the cost
- Benefit structure is typically increment amounts between a min and max amount, and employees have the option to choose the amount they want.
- Carrier usually includes a Guaranteed Issue benefit amount, which is an amount that employees can elect and be automatically approved for without needing to submit additional documentation for carrier approval. If employees want to elect coverage OVER that amount, they must complete an Evidence of Insurability (EOI) form (medical questionnaire) and submit to carrier for review. Based on risk, carrier can approve or deny the additional amount
- Usually has benefit reductions rules for older employees (ie: benefit amount reduced by 50% at age 65)
All disability plan set up process includes the following sections:
- Policy Info (Standard - Same as other plan set up)
- Eligibility (Standard - Same as other plan set up)
- Coverage
- Rates
- Contributions
- Additional Settings (Standard - Same as other plan set up.)
- Resources (Standard - Same as other plan set up.)
Coverage setup for Disability Plans
Coverage tab includes setup of the following:
- Employee Benefits: 2 employee benefit types: a) % of Earnings; & b) Increments
- % of Earnings
- All employees who enroll get assigned a fixed % of their weekly/monthly earnings
- STD is usually a WEEKLY benefit
- LTD is usually a MONTHLY benefit
Carrier enforces both a min and max flat dollar amount.
Since salaries and benefit calculations do not usually result in a rounded amount, carrier may also apply rounding rules.
Some carriers round salary first, then calculate benefit amount. Other carriers calculate benefit amount first, then round benefit amount.
Increments - Employees have an option to select benefits in increments up to the max benefit amount.
Define Increment Amounts.
Max benefit amount could be a dollar amount or % of weekly or monthly earnings.
- Guaranteed Issue (Same as life/AD&D plans)
- Benefit Reductions (Same as life/AD&D plans)
Rates setup for STD & LTD plans
- STD rates are calculated per $10 of benefit amount [(benefit amount / 10) * rate]
- LTD rates are calculated per $100 of benefit amount [(benefit amount / 100) * rate]
- Additional rate options are Age Banded Rates, Gender Based Rates and Tobacco Rates
STD Rates: Flat rate per $10 of weekly benefit
Example: Rate is $0.50 per $10 benefit. Employee’s elects $3000.
[ (500 / 10 ) * .20 ] → Employee’s monthly cost = $10
LTD Rates: Flat rate per $100 of monthly benefit
Example: Rate is $0.50 per $100 benefit. Employee’s elects $3000.
[ (3000 / 100 ) * .50 ] → Employee’s monthly cost = $15
Contributions set up for STD & LTD plans
- Same option to base contributions on company Group and/or Office Locations
- Contributions are entered for the COMPANY’S contribution amount, not the employee’s contribution
- Entered as a % of cost