Long Term Disability Insurance

Question 1

Long Term Disability Insurance

Answer 1

An employer sponsored program that provides disability insurance to employees who are disabled (unable to work) beyond a period specified in the plan

Question 2

Is it more common for an employee to become disabled or die before the age of 65?

Answer 2

Become disabled

Question 3

What is LTDI designed to supplement?

Answer 3

Social Security disability payments

Question 4

When is it indicated? (1)

Answer 4

When an employee needs income if they experience a long-term disability and cannot work

Question 5

What three things can the employer choose?

Answer 5

1. Who will be covered
2. Amount of coverage provided (can vary)
3. Terms and conditions of coverage

Question 6

Residual Clause

Answer 6

You receive a reduced level of payments for a partial disability
ex) 50% disabled = 50% of payment

Question 7

Guaranteed Insurability Clause

Answer 7

on certain dates, you may increase your coverage without a medical exam

Question 8

Cost-of-living Clause

Answer 8

Benefits are adjusted for inflation and this is important for policies with long benefit periods

Question 9

Why should you buy a policy that pays based on a % of income rather than a specific dollar amount?`

Answer 9

this way the monthly benefit increases as your income increases

Question 10

What are 3 specific exclusions?

Answer 10

1. Disabilities during periods when an employee is not under physician’s care
2. disabilities caused by an intentional, self-inflicted injury
3. disabilities beginning before the employee became eiligible for plan coverage

Question 11

The plan usually covers only _____ salaried employees

Answer 11

full time

Question 12

Typically how long is the waiting period?

Answer 12

3-12 months

Question 13

What does the waiting period act like?

Answer 13

A deductible–where employers may tell employees to save up their sick pay to cover this period

Question 14

“Total and Permanent” Disability

Answer 14

An employee is unable to engage in any substantial, gainful activity by reason of any medically determinable physical or mental impairment which can be expected to:
- result in death
OR
-has lasted or can be expected to last for a continuous period NOT less than 12 months

Question 15

“Any Occupation” Disability

Answer 15

A total and continuous inability of an employee to engage in any and every gainful occuptaion for which he is qualified or shall reasonably become qualified for by reason of training, education, or experience

Question 16

How much of pre-disability income do long-term disability plans generally replace?

Answer 16

50%-70%

Question 17

What other benefits can be integrated with ltdi?

Answer 17

• Social Security and workers compensation
• qualified or nonqualified retirement plans
• other insurance
• other earnings

Question 18

Is the employer’s contribution to long-term disability plan tax deductible?

Answer 18

yes

Question 19

Is an employee contribution to a long-term disability plan tax deductible to the employee?

Answer 19

no

Question 20

Are an employer’s payment of long term disability plan premiums taxable income to the employee?

Answer 20

no

Question 21

Are benefits from an employer paid plan table to the employee

Answer 21

yes

Question 22

If an employee is “totally and permanently” disabled, what can reduce the tax on disability income?

Answer 22

limited tax credit

Question 23

What taxes are disability insurance premiums paid by an employer NOT subject to?

Answer 23

FICA and FUTA taxes

Question 24

What are disability benefits subject to if paid directly by the employer?

Answer 24

federal income tax withholding

Question 25

When are disability benefits attributable to an employer’s premium payments subject to FICA taxes?

Answer 25

At the beginning of the disability for a limited period (usually 6 months)

Question 26

Is LTDI subject to ERISA?

Answer 26

yes