When selecting their benefits during the fall open enrollment season, employees typically pay attention to available health plans, likely consider life insurance options, and generally decide how much to contribute to their plan. retirement in the coming year. But fewer are likely to take the time to consider the disability benefits offered, usually as a voluntary benefit option paid for in whole or in part by the employees themselves.
“Disability benefits are not on most employees’ radar,” said Julie Stich, CEBS, associate vice president of content at the International Foundation for Employee Benefit Plans (IFEBP) at Brookfield, Wisconsin. “Employees assume they will never have to use disability benefits, but the reality is that one in four 20-year-olds will become disabled before reaching retirement age,” he said. she said, citing data from the Social Security Administration.
A recent report from the IFEBP,
2016 Employee Benefits Survey, found that disability benefits remain an integral part of employer benefit programs, whether employees are aware of it or not. While it is important to educate employees about the value of coverage that provides continued income in the event of disability, employers can also use open enrollment as an opportunity to review their disability benefits and compare them to what other employers are offering.
The survey results are based on stratified random sampling conducted earlier this year, with respondents comprised of 577 HR and benefits professionals and plan administrators from organizations ranging from less than 50 employees to more than 10,000. , in 20 sectors.
“Employers offer disability benefits to help employees with unforeseen illness or accidents that would prevent an employee from working. By ensuring that employees continue to receive a paycheck, employers can help employees to focus fully on their recovery, ”said Stich.
To help their employees in short-term circumstances, more than 3 in 4 employers surveyed (78%) offer short-term disability benefits (STD) to their employees. The investigation showed that:
- MST benefits are typically offered for 26 weeks (56 percent of responding employers), followed by shorter durations of 13 weeks (16 percent) and less than 13 weeks (15 percent).
- Two in five organizations (39%) do not require a period of service, making workers immediately eligible for STDs when they are hired.
- Employers use a variety of methods to calculate the amount of MST income their employees receive. They usually calculate the benefit on a fixed percentage of earnings (56%), followed by a fixed dollar amount (27%).
Long term disability
For illnesses or accidents that take an employee out of the workforce for an extended period of time, 5 in 8 employers (63%) offer long-term disability (LTD) benefits to their employees. The investigation revealed that:
- Similar to STD benefits, 36 percent of employers require no period of service, making employees immediately eligible for the benefit. Other employers require periods of service of one month or less (20%), six months (13%) or three months (12%).
- When calculating LTD benefits, organizations most often use a fixed percentage-of-earnings formula (83%). The majority of employers offer a benefit equivalent to 60 percent of earnings (65 percent), followed by a range of 61 percent to 69 percent of earnings (14 percent).
- The majority of employers (75%) provide LTD benefits to employees on disability leave until age 65 or until retirement.
“While employees understand the importance of planning for retirement and purchasing insurance to protect their families, most employees did not anticipate a situation where they would need to replace their income if they became disabled and did not. couldn’t work, ”said Jackie Breslin. , director of human capital services for TriNet, a business services provider in San Francisco. “Often times, employees haven’t thought about the importance of long-term benefits until they have a family member, friend or coworker going through a medical challenge and therefore facing a challenge. financial. “
But there are challenges in communicating the value of the benefit, she noted. “The topic can be unpleasant and uncomfortable to discuss as it deals with the realities of illness or injury. Depending on an employee’s age, he may think LTD is only for an older worker and that is just not true. Employers need to be able to communicate why LTD is important to their workplace and to all employees, no matter what stage of their career they find themselves in.
Health care benefits and disability leave
For employees on disability leave, 66% of employers continue to provide health care benefits, according to the IFEBP survey, and:
- A quarter of these employers (25%) provide health care benefits throughout the duration of the disability.
- 24 percent provide health care benefits for 12 months.
- 23 percent provide health care benefits for six months.
- 12 percent provide health care benefits for three months.
Other continuing benefits during disability leave include life insurance benefits (53%), accumulation of pension benefits (22%), employer contributions to a defined contribution pension plan ( 15%) and accrued vacation pay (14%).
As they advise employees to consider the value of disability benefits, employers should ensure that the coverage they offer is at least equal to that of their industry peers, Stich advised. “While no one wants to use the disability, employees will be grateful for these benefits if they need them.”
Related SHRM resources:
Registration season guide open to benefits,
SHRM online Benefits, September 2016
Management of Disability Benefits, SHRM Toolkits, September 2015