Disability Benefits - An Often-Overlooked Piece of the Employee Benefits Package

For Immediate Release
September 13, 2016

Contact:
Brenda Hofmann
brendah@ifebp.org | (262) 373-7756

Disability Benefits: An Often-Overlooked Piece of the Employee Benefits Package

Brookfield, Wisconsin—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.

"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."

A new report, Employee Benefits Survey 2016, found that disability benefits remain a steady inclusion in employers' benefit packages, whether employees are aware of the benefit or not.

"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 (STD) Benefits 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.

  • STD 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 (LTD) Benefits Offered by 63% of Employers

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%).

  • Similar to STD 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 LTD 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 LTD benefits to a disabled employee until the age of 65 or retirement.

Health Care Benefits Often Continue During Disability 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."

The full report, Employee Benefits Survey 2016, is available at www.ifebp.org/benefitsurvey2016.

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The International Foundation of Employee Benefit Plans is the premier educational organization dedicated to providing the diverse employee benefits community with objective, solution-oriented education, research and information to ensure the health and financial security of plan beneficiaries worldwide. The Foundation has more than 31,000 multiemployer, corporate and public sector members representing over 25 million lives. For additional information, visit www.ifebp.org.