There's ample room to choose group STD insurance plan provisions to make the plan fit your company's needs like the proverbial glove.
STD policies are designed to cover the employee from shortly after the time of disability out to some reasonable future date. The most common plans are 13 week plans, but 26-week plans are also common.
While your group STD insurance plan could pay beyond 26 weeks, it's unusual -- that's the date that Social Security disability benefits can begin.
Group STD Insurance Shorthand
STD plans use a common shorthand to describe the plan. You'll often find numbers like this: 1/8/13.
Here's what the numbers mean.
The "1" refers to when benefits begin for disabilities resulting from an accident. The "8" refers to disabilities from an illness. And the "13" refers to the 13 weeks of benefit duration.
Then there's the maximum benefit in dollars per week. In addition to that the plan usually specifies the percent of income replaced.
So a plan that maxes out at $500 benefit per week at an income replacement percentage of 60% would be described as "1/8/13 to $500 per week at 60%."
There can be a fourth number, too. That number refers to benefits beginning on the first day of hospitalization, so the shorthand would be 1/1/8/13. However, first day hospitalization plans are much less common today than ten years ago.
How STD Can Match Your Company Needs
How, then, do you design the proper plan?
Cost isn't the only factor. Meeting your management, Human Resources, and employee needs is part of why you offer benefits, so start by asking the question, "Do we really need a group STD insurance plan?"
The answer to that question depends on several factors. Do your competitors offer employees disability protection? If so, you probably should, too. And even if they don't, your offering it may give you that extra "something" that attracts and retains employees.
On the other hand, if you have temporary workers, seasonal workers, or high turnover, and if that's the way it'll always be, you may not want to give a disability benefit. Without a long-term employee relationship why bother?
For extremely valuable, high-salaried employees you may want to pay full salary for the first few months. In that case, you don't want STD because most STD carriers won't let you supplement employees' disability income. Overpayment eliminates the incentive to return to work.
But for the average mix of white, blue, pink and gray collar workers you may find STD worthwhile. The cost is low - one quarter to one half a percent of the employees' salaries - and employees appreciate the benefit. After you've decided that you want a plan, the key questions to ask so as to both control costs and meet your and your employees' needs are:
- When should the benefits start?
- How long should they last?
- How generous should the benefits be?
So When Should Benefits Begin?
Many STD plans pay 1st day accident benefits, 8th day illness benefits, and pay benefits for 13 weeks.
Well, if you have a sick-pay plan that annually allows five to ten sick days at full pay, you don't need such a quick start. Having both accident and sickness benefits start after a week will reduce plan cost by about 10%, and waiting two weeks will reduce the cost by as much as 25-30%.
If that meshes with your sick pay plan, take advantage of the savings. In fact, you can go as far out as 30 days before benefits start. That will give you a substantial reduction in benefit cost, but the trade-off is less security for the employees.
Think About Maternity Claims
There's another consideration. Maternity is considered a covered illness in many states, including Massachusetts.
Maternity is also the most common reason an STD claim is filed, and in many companies maternity is the primary reason they have a group STD insurance plan.
The maternity benefit period is six weeks for normal delivery and eight weeks for caesarian section. The waiting period is considered part of the benefit period.
We go into much greater detail in another section, so look for that for details.
But in summary, if you have a one-week wait for benefits your employee will only collect five or seven weeks of benefit.
Call or email BBI Benefits to discuss your STD program. The benefit start date is something you and your broker can discuss together.
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