Disability benefits are an often-overlooked piece of the benefits package

When weighing the employee benefits of a new job, candidates definitely consider the health care benefits, probably read over the retirement plan and will no doubt investigate the number of vacation days—but few new hires take time to consider the disability benefits offered. That’s according to the International Foundation of Employee Benefit Plans’ Employee Benefits Survey 2016, which found that disability benefits remain a steady inclusion in employers’ benefit packages, whether employees are aware of the benefit or not.

“Disability benefits aren’t on most employees’ radar,” explained Julie Stich, CEBS, associate vice president of content at the International Foundation of Employee Benefit Plans. “Employees assume they will never have to use disability benefits, but the reality is that one in four 20-year-olds will become disabled before reaching retirement age.”

“Employers offer disability benefits to help employees through unforeseen illnesses or accidents that would prevent an employee from working. By ensuring that employees continue to receive a paycheck, employers can help employees to focus fully on their recovery,” said Stich.

Short-term disability. The survey found that short-term disability benefits are offered by 78% of employers. To help their employees through short-term circumstances, more than three in four employers surveyed offer short-term disability benefits to their employees. According to the survey:

• Short-term disability benefits are typically offered for 26 weeks (56% of responding employers), followed by shorter durations of 13 weeks (16%) and less than 13 weeks (15%).

• Two in five organizations (39%) require no service periods, making workers immediately eligible for short-term disability upon hire.

• Employers use a variety of methods to calculate the amount of short-term disability income their employees receive. They most typically calculate the benefit on a fixed percentage of earnings (56%), followed by a fixed dollar amount (27%).

Long-term disability. Long-term disability benefits are offered by 63% of employers, according to the survey. For illnesses or accidents that remove an employee from the workforce for an extended period of time, five in eight employers surveyed offer long-term disability benefits to their employees. The benefit is more common among corporations (89%) than among public employers (77%) or multiemployer plans (21%). The survey found:

• Similar to short-term disability benefits, 36% of employers require no service period, making employees immediately eligible for the benefit. Other employers require service periods of one month or less (20%), six months (13%) or three months (12%).

• When calculating long-term benefits, organizations most commonly utilize a fixed percentage of earnings formula (83%). The majority of employers offer a benefit that equals 60% of earnings (65%), followed by a range of 61-69% of earnings (14%).

• The majority of employers (75%) offer long-term disability benefits to a disabled employee until the age of 65 or retirement.

Health care benefits during leave. For employees on disability leave, 66% of employers continue to provide health care benefits. A quarter of these employers (25%) provide health care benefits for the entire duration of the disability, 24% for 12 months, 23% for six months and 12% for three months.
Other benefits continued during disability leave include: life insurance benefits (53%), pension plan accrual (22%), employer contributions to a defined contribution retirement plan (15%) and vacation benefits accrual (14%).

“Employees should review the disability policies of their employer,” suggested Stich. “Although no one wants to use disability, you’ll be grateful for these benefits if you need them.”

SOURCE: www.ifebp.org/benefitsurvey2016

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