Short Term disability

[Guest kathleen burke]

A company of 14 employees wants to establish a short term disability plan. Currently they have unlimited sick days a an LTD plan after 6 months. The President wants to do the right thing for his employees. What is the standard for a small business? Any suggestions on a plan?

Thank You for your response - Kathleen

[Guest Advantage Benefits]

There is much flexibility in designing a short term disability plan. Ideally, you want to coordinate with your long term plan.

Most short term plans can begin the very first day for accidents and after 7 days for sickness/illness. The benefit amount is 60% of pay to a maximum of $500 or $750, depending on the average wages of the group.

Hope this helps. Quotes and prices are very easy to put together. A free quote can be directed to advaness@msn.com.

[Guest Charlie Stevens]

I am an employment attorney representing employers. The standard arrangement is 60% to 66.6% of pay starting on the 7th or 8th day of absence for illnesses and starting on the 1st day of absence due to accident or hospitalization. The duration is for periods ranging between 12 weeks and 26 weeks depending on the Company, the demographics of the workforce, etc. While there are a number of insurance products available for short-term disability, most employers self-fund these benefits. It is important that you pay attention to certain legal issues when adopting the plan. Depending on its terms, it may or may not be governed by ERISA or state laws. You will also likely have some coordination with family and medical leave. The definition of disability may be problematic as well as the identity of the person who decides whether the employee is, in fact, disabled. If you have other specific questions, please email me at cpstevens@mbf-law.com. Good luck.

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Charlie Stevens

Michael Best & Friedrich LLP

[Guest Advantage Benefits]

In the ten years that I have been selling group benefits I have never seen a group that self-insured their short-term disability plan. Many larger companies say 100 or more do in fact go the self-insurance route for short-term while insuring their long-term and life plans.

Smaller companies usually do not have the time or resources to tackle all the items mentioned in Mr Stevens' message. It is more simple to insure the plan and use the policies and benefits booklets of the underlying insurance company that are in compliance with all current regulations.

In the end the best thing to do is get some quotes to insure the plan and then find out how much it would cost to set-up your own self-funded plan (policies, benefit booklets, claims process, etc). Keep in mind that via the self-funded method you will have to pay all claims out-of-pocket, will be responsible for withholdings on benefits and you will be the sole judge if someone is eligible for benefits.

[Guest nac]

I have to agree with Charlie, to some extent. Fully funding an STD is pretty expensive, which is why many, if not most, employers tackle it from a self-funded angle.

However, we came up with a good alternative for my previous employer. We had a group of about 75 and wanted to self-fund but didn't want to be the bad guy in claim adjudication. Many carriers will provide a minimum benefit level (i.e. $150 per week) and effectively work as your claims administrator. You can then self-fund whatever difference you want to make up (usually 50-70%), based on their advice to pay. This has the advantage of maintaining confidentiality, which seems to be a hot topic these days.

[Guest Charlie Stevens]

Among my clients that provide short-term disability benefits for their employees, the majority pay for these benefits out of their general assets, rather than purchase insurance. It is true that more smaller employers insure this benefit than larger ones but I know of only a handful have insurance for this. Still, insurance is a good idea for a number of reasons. First, NAC is right that it's good to have a buffer (evil claims administrator) between the employer and the employee so if claims get denied, it doesn't have a negative impact on employee relations. Second, if the benefit is insured, there is a much stronger argument that the STD plan is an ERISA plan and, therefore, the employer is likely in a better position if an employee makes a claim for benefits that would otherwise be litigated in state court. Under these circumstances, the employer would be better of with an insured/ERISA plan and the protections that ERISA provides to employers, i.e., no jury trial, no claim for punitive damages, and greater deferrence by the court for the decisions of the plan administrator.

[Guest Advantage Benefits]

Here are my last thoughts on this. Kathleen should first get a fully insured quote and then figure out how much it will cost to set-up a self-insured plan.

I have a group of 27 employees that provides $10,000 of life insurance a very simple short-term disability plan. The benefits pay $200 per week starting the first day of an accident and 8th day of a sickness extending for 26 weeks. The total monthly cost is $400. Since Kathleen's group is only 13 employees the cost will be less. Actually I can not say that until I get a look at a census (dates of birth, etc).