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I don't work on ESOPs. Is Excludedables an ESOP term?

I have a plan that is similar to this - the trick is that none of the people are HCE's.

Hard to imagine that it would pass coverage

I've seen it done by attorneys on the deal, accounting firms (usually the larger ones like PWC or KPMG), compensation consultants (Pearl Meyer, etc.). Just depends on the context, whose side they are on, and who's most capable of the bunch.

I think theoretically ERISA and Code would let you self-insure disability. The problems are business issues. The one mentioned above, i.e., lack of market on sell-side, is relevant, but my guess is an even bigger issue, and one that partly accounts for lack of market, is the benefit security. Self-insured health plans are dependent on continued funding by employer and employee contributions. Certainly, if the employer becomes insolvent, or is sold, and its health plan goes away, there may be a hiccup with paying runout claims, but the employees move on and get other coverage. If you are long-term disabled, that could be it--you may never work again. If, e.g., that happens to you at 30, the employee needs to know that he or she will receive LTD payments for 35 years, month-in, month-out. Insurance companies are long-term players, and are regulated by states so that they cannot shed their obligations, and even in bankruptcy there are guarantee funds. So the obligor of the LTD is solid and long-term. And LTD always has a waiver of premiums once employee becomes disabled. So with insured LTD, if the employee becomes disabled, he or she leaves with a paid-up commitment from the insurer to pay benefits until age 65 or 66 (assuming the LTD recipient doesn't get better ), and that promise is not dependent on the longevity, financial health, or willingness of employer to continue plan. It's a paid up obligation of the insurer from first payment to last.

Nature of claims is entirely different from health: e.g., low incidence with high average individual exposure from long tails a la workers' comp. You may find stop coverage for STD/LTD offshore at high expense including foreign excise taxes. If domestic health stop loss carriers saw an opportunity for a profitable new product, they woulod have brought it to market millenia ago. By the way, domestic carriers do write stop loss coverage for dental claims. There is little interest because of lack of risk takers on both sides. Au contraire, there is much cession of life coverage especially among new carriers being risk averse.

I think that if the person had been 100% vested on the old schedule, no election is needed, since being 100% vested would have to be protected. 3 years or no 3 years.

But, I don't think it's up to the actuary to make sure the notices were delivered to the participants.