LONG TERM DISABILITY
When faced with an employee who has been disabled, uninsured employers have few options. Do you continue to pay all or part of a salary? Offer unpaid leave? Terminate employment? For an employer and employee, the choices can be devastating. An insured Long Term Disability plan can replace up to 66 2/3% of an employee's income up to the age of 67 in a situation where catastrophic illness or injury exists. A managed LTD plan allows an employer to outsource the difficult decisions surrounding a disabled employee to disability experts. Along with income protection, most disability plans offer rehabilitation and return-to-work services that are essential to the recovery of disabled employees. The goal of Long Term Disability insurance is to financially protect and proactively return disabled employees to a productive life.
How many people really use their LTD plan?
The Social Security Administration (SSA, 2003) estimates that 3 in 10 of today's 20 year olds will suffer a disability before reaching age 67. In another sobering statistic, the SSA reports that 75 percent of people working in the private sector have no long-term disability insurance. Essentially, three of four workers would have to rely on their own personal savings, limited state-run insurance and Social Security for replacement income in the event they could not work because of a disability. In August 2004, the average monthly Social Security benefit for disabled workers was $867. Over the course of a year, that totals approximately $10,400, and for many workers and their families, that is significantly less than their annual expenses. You are more likely to become disabled than to die during your working years.
How much will LTD cost the company?
The general rule is that a fully insured LTD plan will cost a company about one half of one percent of the company's monthly payroll.
Will an LTD plan pay a disabled employee who returns to work on a part-time basis?
Yes, most LTD plans will pay an employee who is limited from performing all of their job functions, and has suffered a 20% or more loss of income as a result.
What are the most common income replacement percentages?
In our experience, most companies implement a plan that replaces 60% or 66 2/3% of an employee's income in the event of a disability. The highest percentage typically available is 66 2/3%.