Why Are Short-Term Disability Benefits Important?
Although injury or illness can occur at home and elsewhere, a surprisingly high number of accidents leading to disability happen in the workplace in any given year, creating a significant need for disability insurance coverage.
According to a 2018 report by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), approximately 150 American workers die on the job each day, and about 7.4 to 11.1 million injuries occur annually, often remaining unreported.
According to the Disability Awareness Council, about one in four young adults aged 20 today will face the risk of becoming disabled at some point in their working careers before retirement. Some disabilities will require more support than short-term disability insurance provides. On average, long-term disability cases last about 34.6 months, which means losing nearly three years of work and lost income.
Short-Term Disability Benefits
Short-term disability insurance provided by the employer pays a percentage of the employee’s salary for a specified period if they become ill or injured and are unable to perform their job duties. Generally, the benefit can reach up to 60 percent of the employee’s total weekly earnings.
Independently purchased short-term disability insurance works similarly, providing a range of partial to full income coverage, depending on the policy level and premium the individual chooses to pay.
Note: Disability income may be subject to taxation or may not be, depending on whether the policy was funded with pre-tax or post-tax dollars, among other considerations.
When Does Coverage Begin?
Although most employers can determine when benefits will start, coverage typically begins anywhere from one day to 14 days after an employee experiences a condition that makes them unable to work. The coverage period may range from nine to 52 weeks following the qualifying event. Often, employees are required to use sick days before short-term disability insurance kicks in if the illness keeps them out of work for an extended period.
Employers often have other types of insurance that cover workplace injuries, such as workers’ compensation, which comes with different rules and requirements compared to disability insurance for injuries that occur outside of work. If an employee must remain off work longer than the coverage period of short-term disability insurance, the long-term disability insurance or permanent disability may start to kick in. This may occur after 10 to 53 weeks from the qualifying date.
Note: Long-term disability is determined by a team of physicians and insurance analysts at the insurance company who monitor each case closely.
Who Pays for Short-Term Disability Insurance?
A short-term disability insurance policy can be an employer-paid benefit or an employee-paid benefit. Generally, employers offer short-term disability insurance coverage as a benefit.
Companies have the option to have employees pay for the coverage, with certain tax implications. Each state sets its own requirements regarding whether employers must provide short-term disability insurance and the minimum required coverage limits. State governments may also set limits on weekly cash benefits. Group short-term disability coverage can be obtained in the following ways:
A contractual agreement with an insurance company covering disability. Through a self-funded plan agreed upon directly by the company. (Notable providers include Aflac and MetLife.)
Conditions
Policy and Responsibilities
As an employer, you can create a policy that requires employees to use sick days before transitioning to short-term disability insurance for ongoing illness. You may also request documentation from a doctor to validate the illness or injury.
During the time an employee is away from work, the employer may also request that the employee visit an approved healthcare provider or occupational health center for regular updates on the employee’s health progress.
The management of these aspects will be the responsibility of a third-party claims manager while the employee is on leave. Employees are required to report any changes in their condition immediately. These rules are in place to help prevent insurance fraud, a problem that costs employers billions of dollars each year.
Short-term disability insurance plans outline different terms for eligibility. The main eligibility conditions typically include:
Employees must work for the employer for a specific period before coverage begins. Employees must work full-time, usually 30 hours or more per week.
The following components may be included in a short-term disability insurance benefits package:
Percentage of weekly salary paid (usually up to 60 percent of weekly salary). Duration of short-term disability benefits (typically between nine and 52 weeks). Maximum time covered under the disability program (up to 52 weeks).
It’s also important to be aware of the state laws where employees reside.
Note: Although most states do not have mandatory short-term disability requirements, the Society for Human Resource Management advises that five states including California, Hawaii, New Jersey, New York, and Rhode Island, as well as the U.S. territory of Puerto Rico, have mandatory coverage guidelines.
Employers may also want to consider offering a voluntary benefits option for a long-term disability program that takes over after the employee’s short-term disability period ends.
Frequently Asked Questions (FAQs)
What conditions qualify for short-term disability?
If you are temporarily unable to work due to an accident, illness, or even pregnancy, you may qualify for short-term disability benefits. However, your policy document will outline the conditions that do not qualify you for short-term disability benefits. Some exclusions for short-term disability benefits include self-inflicted injury, job loss due to war, injuries resulting from riots or participation in protests, loss of license, or job loss due to incarceration.
How do I apply for short-term disability?
If you are temporarily unable to work due to a condition that meets the short-term disability criteria, notify your employer. For the short-term disability plan provided by your employer, you will typically follow the process with the human resources department and the group insurance company. You will be required to fill out a short-term disability insurance application form and submit it to the insurance provider along with a doctor’s certificate, medical records, and any other documentation required by your insurance policy.
Sources:
AFL-CIO. “Death on the Job: The Toll of Neglect, 2018.”
Council for Disability Awareness. “Chances of Disability, Me Disabled?”
Aflac. “Is Short-Term Disability Taxable?”
MetLife. “Short Term Disability Insurance.”
The Hartford. “Short-Term versus Long-Term Disability Insurance Coverage.”
NJ.gov. “Temporary Disability Insurance.”
University of Pennsylvania Human Resources. “Short-Term Disability (STD).”
Cigna. “Short-Term Disability Insurance Summary of Benefits.”
Society for Human Resource Management. “Which states require employers to have a short-term disability plan?”
Aflac. “How Does Short-Term Disability Work?”
Princeton University. “Instructions for Short-Term Temporary Disability.”
Source: https://www.thebalancemoney.com/short-term-disability-basics-1177839
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