Drafting of STD program

[Guest Joy]

I am working of implementing a STD policy (we currently only offer LTD after a 90 day wait) and am looking for typical plan designs. Can you help by sharing how your plan operates?

[Guest Penn]

You'll want your STD plan to dovetail or make sense with your sick, vacation and LTD plans.

On the back end, you'll want your STD plan to end when your LTD elim period ends (so 13 weeks of disability for you to dovetail with the start of LTD). Be careful in how you phrase that, because some quotes/contracts will say 13 weeks of STD payments but if you have a one or two week elimination period for the STD then you'll have overlap in benefits (which no doubt your LTD claims adjuster will account for but do you really want the hassel of explaining the amounts on the checks to your ees).

On the front end, you'll want to consider how many sick and vacation days a typical ee might have. For example, if you have a policy of up to 6 paid sick days a year and two weeks vacation, you might consider a 15 day elimination period on the STD. If you have no sick leave, you might consider a 7 day elimination period.

You'll have financial considerations to make as well - what can you afford? And will it make more sense for you financially to change the LTD to a 180 elimination period and have the STD last until the LTD kicks in or are you better off keeping the 90 day elim on the LTD?

Benefit level is another consideration. My clients are split pretty evenly on whether they have the same percent of salary covered for both STD and LTD or if they reduce it when the LTD kicks in. So you might pick 67% on STD and 60% on LTD or 67% on LTD. (Just as a note of warning, pay attention about the percents that you choose and the maximums - are you talking about covered weekly payroll, covered monthly payroll, maximum benefit?)

For your maximums, be careful that you don't significantly cut the salary that you are covering. To keep it simple, let's assume you want 60% of their pay covered. To cover $90,000 salary you would have STD max of $1038/week and LTD max of $4500/month (that's paid benefit in both cases). Granted, $1038/week is a weird max, but you get the idea.

[KIP KRAUS]

Joy:

I agree with the majority of information Penn has provided and it is could giudance. However,I would not recommend concidering a typical sick days policy in determining an elimination period for STD. If you have a separate sick day policy(e.g., 5 days per4 year)such days should be reserved for personal sick time or sick time to care for a dependent child.

Typically, STD plans are for longer durations, and more serious ailments.

I reasonable STD plan designe may be require a 7 day waiting period for illness, and no waiting period for accident or hospitalization with a duration of 13 to 26 weeks.

I would reccomend a 50% benefit for STD and 66 2/3 for LTD.