Chpt 5 Group DI Benefits

Question 1

Long term disability (LTD)

- Benefit offsets

Answer 1

1. LTD benefit offset by other income to ensure the sum not > pre-DI earnings
2. Integration with Social Security treated in a variety of ways
   
   2. 1 Only the primary Soc. Security benefit may be deducted
   3. 2 Any family Soc. Security benefit may be deducted
   4. 3 All sources integration: the primary and family Soc Security benefits deducted if DI benefit + Soc. Security > some income percentage
3. Advantages of disabled individual receiving Soc. Security benefits
   
   3. 1 Reduces cost of the insurance program for the ER
   4. 2 EE receives higher income replacement since Soc Sec benefits aren’t fully taxed
   5. 3 Allows continued Soc. Security credits for the individual
   6. 4 Qualifies the disabled person for Medicare benefits
4. Methods to reduce LTD benefits by a disabled EEs earnings
   
   4. 1 Proportionate loss formula: percentage of lost work earnings is applied to the benefit amount
   5. 2 50% offset: benefit reduces by $1 for every $2 of earnings
   6. 3 Work incentive benefit: ignores earnings during an initial period unless earnings + benefits > 100% of pre-DI earnings. At that point, benefit reduces dollar for dollar by the excess amount. After incentive period, use either proportion or 50% offset

Question 2

Long term disability (LTD)

-Limitations and Exclusions

Answer 2

1. These manage anti selection and avoid administration of subjective claims
2. Special conditions limitation clause
3. Pre existing condition exclusion
4. Other: war, intentionally self-inflicted injury, commission of felony

Question 3

Long term disability (LTD)

-Optional Benefits

Answer 3

1. COLA (cost of living adjustment)
2. Survivor benefit
3. Expense reimbursement (for dat care expenses)
4. Pension benefit
5. Conversion option
6. Spousal benefits
7. Catastrophic benefits: additional amount for a more serious disability

Question 4

Group DI provisions

Answer 4

1. Definition of disability
   
   1. 1 Disability depends on insured’s inability to perform occupational duties
   2. 2 Own occupation definition
      
      1. 2.1 More generous
      2. 2.2 Makes it easier to qualify for DI benefits
      3. 2.3 After EE disabled for some time, use “any occupation” definition
   3. 3 Partial, residual, or loss of earnings definition: allow someone working part-time to qualify for DI benefits, reduced by their work earnings
2. EP, BP
3. Benefit amounts
   
   3. 1 A % of pre-disability earnings (such as 60%), not to exceed a maximum
   4. 2 EE-paid prem results in a higher % of after-tax income being replaced
      
      3. 2.1 Employer-paid premium result in taxable benefits
      4. 2.2 EE-paid premiums result in tax-free DI benefits
4. Benefit offsets (DETAILS ON FOLLOWING CARDS)
5. Limitations and exclusions (DETAILS ON FOLLOWING CARDS)
6. Optional benefits (DETAILS ON FOLLOWING CARDS)

Question 5

Short-Term Disability (STD)

Primary differences between STD and LTD

Answer 5

1. STD benefits are paid weekly vs monthly under LTD
2. Benefit period for STD is shorter
3. STD has higher frequency than LTD and shorter claim durations
   
   3. 1 Experience becomes credible more quickly m, and greater proportion of STD self-insured than LTD

Question 6

STD definition of disability, benefit amounts, offset ms, exclusions, and optional benefits

Answer 6

1. Definition if disability
   
   1. 1 Unable to perform own occupation
   2. 2 Non-occupational coverage: only cover accidents or sicknesses occurring outside of the workplace
      
      1. 2.1 Avoids overlap with workers compensation coverage
   3. 3 Partial disability benefits may be available
2. STD maximum benefit amounts typically smaller than LTD
   
   2. 1 EEs have other sources of funds to meet short term needs
   3. 2 ER sick leave program supplements the STD plan
3. STD usually not integrated with Soc Sec or part-time earnings
4. Exclusions for STD are few
5. Optional Benefits
   
   5. 1 24-hour coverage
   6. 2 First day hospital coverage
   7. 3 Survivor benefit: similar to LTD