Long Term Disability Insurance Flashcards
Long Term Disability Insurance
An employer sponsored program that provides disability insurance to employees who are disabled (unable to work) beyond a period specified in the plan
Is it more common for an employee to become disabled or die before the age of 65?
Become disabled
What is LTDI designed to supplement?
Social Security disability payments
When is it indicated? (1)
When an employee needs income if they experience a long-term disability and cannot work
What three things can the employer choose?
- Who will be covered
- Amount of coverage provided (can vary)
- Terms and conditions of coverage
Residual Clause
You receive a reduced level of payments for a partial disability
ex) 50% disabled = 50% of payment
Guaranteed Insurability Clause
on certain dates, you may increase your coverage without a medical exam
Cost-of-living Clause
Benefits are adjusted for inflation and this is important for policies with long benefit periods
Why should you buy a policy that pays based on a % of income rather than a specific dollar amount?`
this way the monthly benefit increases as your income increases
What are 3 specific exclusions?
- Disabilities during periods when an employee is not under physician’s care
- disabilities caused by an intentional, self-inflicted injury
- disabilities beginning before the employee became eiligible for plan coverage
The plan usually covers only _____ salaried employees
full time
Typically how long is the waiting period?
3-12 months
What does the waiting period act like?
A deductible–where employers may tell employees to save up their sick pay to cover this period
“Total and Permanent” Disability
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
“Any Occupation” Disability
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
How much of pre-disability income do long-term disability plans generally replace?
50%-70%
What other benefits can be integrated with ltdi?
- Social Security and workers compensation
- qualified or nonqualified retirement plans
- other insurance
- other earnings
Is the employer’s contribution to long-term disability plan tax deductible?
yes
Is an employee contribution to a long-term disability plan tax deductible to the employee?
no
Are an employer’s payment of long term disability plan premiums taxable income to the employee?
no
Are benefits from an employer paid plan table to the employee
yes
If an employee is “totally and permanently” disabled, what can reduce the tax on disability income?
limited tax credit
What taxes are disability insurance premiums paid by an employer NOT subject to?
FICA and FUTA taxes
What are disability benefits subject to if paid directly by the employer?
federal income tax withholding
When are disability benefits attributable to an employer’s premium payments subject to FICA taxes?
At the beginning of the disability for a limited period (usually 6 months)
Is LTDI subject to ERISA?
yes
