Nearly all large organizations provide Long-Term Disability (LTD) coverage as part of their core set of employee benefits. A typical Group LTD benefit is 60 percent of base pay, with a maximum monthly benefit of approximately $15,000. While this benefit is generally adequate for most employees, the income protection can be poorly suited to employees that require higher benefit limits and incentive compensation coverage.
Executive Income Replacement Gap
Highly compensated employees with variable incentive compensation can often receive below 50 percent of their take-home pay after a disability. However, to maintain their current lifestyle, most people need 75-80 percent of their pre-disability compensation. With lengthy disabilities, this income replacement gap can be exacerbated by unexpected medical costs and having to pay medical insurance premiums. These factors can result in erosion of personal savings and possible financial ruin.
Supplemental LTD Policies
The solution is to provide a Supplemental LTD insurance plan for your highly-compensated employees. These policies can be an effective way for employees with substantial salaries or a nontraditional compensation arrangement to sufficiently protect themselves and their savings from the risks inherent to becoming disabled. For employers, a well-designed Supplemental LTD plan can also have an impact on the company’s efforts to recruit, retain, restore and retire the industry’s best executive talent.
The Supplemental LTD plan can be easily integrated with an existing Group LTD plan. It can be designed to protect up to 75 percent of the employee’s total compensation and offer higher monthly benefit limits at no cost to the employer. If desired, the employer can also supplement the cost of the employee premiums creating a highly-perceived recruiting and retention tool.
Contact our Benefits Division with any questions.
Information courtesy of Marsh Financial Insurance Services.