Group Short-Term Disability Benefits
Group short-term disability benefits (STD) are also referred to as weekly indemnity (WI) and provide a percentage of a person’s salary if he or she is unable to work for a short period of time due to sickness or injury. Group short-term disability benefit policies typically have a limit on the amount that will be paid and another limit on the amount of time benefits will be paid for. Typically, a group short-term disability benefits policy provides one-half to two-thirds of the insured person’s salary and is usually coordinated with the features of a long-term disability benefits plan.
The payment of group short-term disability benefits will typically begin after a specified number of days, which is commonly referred to as the waiting period. The length of the waiting period typically depends on whether the disability is due to illness or injury, and whether the employee is confined to a hospital. Some examples of waiting periods based on the type of disability are as follows:
- Accident waiting period: from the first, fourth, eighth or fifteenth day.
- Sickness waiting period: from the fourth, eighth or fifteenth day.
Benefits are typically paid from the first day that the employee is confined to a hospital. The shorter the waiting period, the higher the premium.
The benefit schedule is typically based on the appropriate tax status of the plan. If the employee enrolled in the plan pays the entire premium than the benefits received by the disabled employee are non-taxable. If an employer is paying the entire short-term disability benefits premium, the benefit will be taxable when received by the employee; or the short-term disability benefit will be non-taxable if the employer pays the premium on behalf of the employee and the full amount of the paid premium is treated as taxable income to the employee.
A short-term disability benefits plan that is taxable will typically have a benefit of 55% to 75% of weekly earnings. A short-term disability benefits plan that is non-taxable will typically have a benefit of 55% to 66.67% of weekly earnings.
Non-Evidence Maximum (NEM):
The non-evidence maximum is the amount of insurance that the insurer will provide to an individual without them being required to submit evidence of good health. Any amount an employee is eligible to apply for above the non-evidence maximum requires the employee to submit medical evidence to the insurer. The insurer will then ask for further information if required, approve or decline the excess coverage. Some employees may not qualify for coverage medically, the non-evidence maximum wherever applied is an extremely valuable and important feature of a group benefits plan.
The overall maximum is the maximum amount of insurance that the insurer will provide under the terms of the contract.
The benefit period is the maximum amount of time or duration that the short-term disability benefits are payable. Benefit periods typically range from 15 weeks (to coincide with the E.I. Sickness Benefit period), 17 weeks and 26 weeks. The short-term disability benefit period is typically integrated with the Long-Term Disability (LTD) benefit. For example, a short-term disability benefits plan with a waiting period of 1 week and a benefit period of 15 weeks would usually be coordinated with a group LTD plan which should include an elimination period of 16 weeks. When short-term disability benefits and long-term disability benefits are integrated together, an employee can receive benefits seamlessly.
Definition of Disability:
An employee is generally considered disabled if he or she is unable to perform any or all aspects of his or her regular occupation due solely to sickness or accidental injury. Commonly assessed on whether the employee can perform the essential duties of the job or any other work for remuneration or profit. The employee must be under the care of a physician.
Employment Insurance (EI) Integration:
As EI sickness benefits are generally payable at the same time as short-term disability benefits, insurers may offer different options depending on whether the employer wants the EI benefits to be considered in their benefits plan.