Long Term Disability - Termination of Employment

[Guest CJA]

I am new to health and welfare benefits practice (main focus has been pension plans). If an employee who becomes disabled uses up all sick pay, vacation pay, and then remaining STD benefits, and then becomes covered under an employer sponsored LTD plan, at what point (if any) is there a separation from employment with the employer? Thanks in advance for any quidance.

[J Simmons]

That depends on the agreement and understanding between the employer and the disabled employee about whether the disabled employee will return to work if the disability ends, and whether either has taken action to end the employment arrangement. The mere fact that the individual is on LTD does not mean he/she is yet an employee.

Some employers will choose to keep the person on as an "employee" for group health coverage and other benefit purposes. See for example Delcastillo v. Odyssey Resource Management, Inc., No. 04-3676 (Fed. 8th Cir. 12/23/2005) (Fed. 8th Cir., 2005).

As for action taken by the employer to end the employment relationship, watch out for ADA issues and perhaps state law protections.

[Guest Pecos]

If you work with a self-funded plan, you may want to add clear language in the plan regarding disabled employees and their eligibility. For example under the coverage terminates section, state when a disable employee would lose coverage (when they turn 65 or reach normal retirement age with SSA or just one year of coverage from the date of disabilty etc. )Some reinsurance companies may not pay for claims for disabled employees unless their eligiblity is clearly stated in the plan.