the long and short of it

As you know, Mo is in flare and starting his Acthar treatment this week. This is also the week he starts Short Term Disability.

What is Short Term Disability?

Short term disability is a type of insurance that pays a percentage of an employee’s salary for a specified amount of time, if they are ill or injured, and cannot perform the duties of their job. Coverage usually starts anywhere from one to 14 days after your employee suffers a condition that leaves them unable to work. Many times, employees are required to use sick days before short term disability kicks in, if it’s an illness that keeps them out of work for an extended period of time. This is why there is usually a different policy for short term disability for sickness versus an injury.

Who Pays for Short Term Disability Coverage?

A short term disability policy can be an employer or employee paid benefit. Generally, though, short term disability coverage is employer-paid. Companies do have a choice of having employees pay for coverage, with certain tax implications.

Group coverage for short term disability can be attained in the following ways:

  • Contract agreement through an insurer that covers disability.
  • Through a self-funded plan set aside by the employer directly.

Coverage Terms

As an employer, you can create a policy dictating that employees use sick days before going on short term disability for an extended illness. You can also require documentation from a doctor to prove an illness or injury.

Different short term disability plans dictate different terms for qualifications. The main terms are listed below:

  • Employees need to work for the employer for a certain amount of time before coverage kicks in.
  • Employees need to work full-time, usually 30 hours or more a week.

The following are part of what a short term disability plan benefits package may include:

  • Percentage of weekly salary paid out (typically between 50% – 70% of weekly salary).
  • Duration of short term disability benefits (typically between 10 to 26 weeks).
  • Maximum amount of time covered under this disability program.

It’s also important to know the rules of the states where you have employees. While short term disability is not a requirement in most places, some states such as Hawaii, New Jersey, New York and Rhode Island mandate that short term disability benefits are provided for up to 26 weeks. You may also want a long term disability program in place once an employee’s short term disability ends. If an employee is still out of work due to illness or injury, a long term disability can help even further.

In Mo’s case, his employer requires him to use one week paid vacation before STD (an unfortunate acronym, we know) kicks in. Then his policy states that he’ll continue to receive full wages during weeks 2 – 9 of STD, thereafter receiving 66% of his salary for up the rest of his STD (up to 180 days, or 26 weeks). If Mo’s condition worsens after 6 months, he would then need to apply for Long Term Disability.

What is Long Term Disability?

Disability insurance is a benefit that is generally one of the most important parts of a benefits package. While some companies opt to fund a short term disability or don’t even offer one at all, many more employers do offer a long term disability program funded through a third party administrator such as a disability insurer.

According to Unum, a major provider of disability insurance, 3 out of every 10 workers between the ages of 25 and 65 will experience an accident or illness that keeps them out of work for 3 months or longer, with nearly 60% of these injuries occurring off the job. If an employee is hurt off the job, worker’s compensation will not cover them. When an employee cannot work for an extended period of time, a long term disability plan can help cover a portion of the employee’s salary. Long term disability usually kicks in after a short term disability policy has run out.

Who Pays for Long Term Disability Coverage?

There are a few choices on who can pay for a long term disability plan. Years ago, many companies paid the full amount for long term disability. Now the trend has costs shifting away from this method. Depending on which option is chosen, there may be different costs and tax implications:

  • Employer fully paid plan
  • Employee fully paid plan
  • Shared cost plan

Coverage Terms

Employers can choose how much coverage to elect for their employees. Most plans cover 50-70% of monthly salary. The duration of plan benefits can also extend for awhile. Some plans only pay out 5-10 years worth of disability to anyone qualified, while others will pay out till age 65, based on a rate schedule.

Under plan rules, employees filing for disability can only qualify for coverage under certain terms. The main terms are listed below:

  • Employees need to work for the employer for a certain amount of time before coverage kicks in.
  • Employees need to work full-time, usually 30 hours or more a week.

The following are part of what a long term disability plan benefits package may include:

  • Percentage of monthly salary paid out up to a pre-determined monthly amount (typically between 50% – 70% of monthly salary).
  • starts (typically between 90 and 180 days).

Depending on plan terms, a person on disability may be limited to how much coverage they receive, and will have to choose another career for which they are suited, in education or training. Another option, usually reserved for highly skilled workers or upper management, is a long term disability contract that allows a person with disability to receive benefits for the lifetime of the coverage, without switching professions.

In Mo’s case, there are a TON of prerequisites to fulfill before Long Term Disability starts – like proof of disability, application for Social Security disability benefits along with an SSA signed release authorizing information sharing, a reimbursement agreement for overpayments, evidence of continuing disability, and proof he’d be under appropriate care and treatment of a doctor throughout his disability.

LTD benefits begin after 180 consecutive calendar days (this is known as the “elimination period”). If he’d return to work for 30 days or less during his elimination period, he would not need to complete a new elimination period (aka start the whole damn process over again).

Another complication to figuring out LTD is his employer offers two different LTD plans – one that is a taxable benefit, and one that is a non-taxable benefit (that part is a math equation that makes my head hurt a little too much to explain here.)

All in all we are VERY lucky that Mo’s job provides both STD and LTD!!! To have Mo’s disability income while he is being treated is the only way our family can survive financially.

If you are still working while sick we encourage you to research your company’s STD/LTD options – there may come a day you’ll need to know how this whole “disability thing” works.

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