Group Long Term Disability (LTD) is a beneficial and important employee benefit. However, due to the inherent limitations of Group LTD plans, certain employees are often discriminated against due to their compensation structure or very level of compensation. These affected employees tend to be the highly compensated leaders or top performers in an organization. They may even be the individuals who are most responsible for acquiring the LTD plan for the rest of the employees. So just how does this happen and what can be done to correct the benefit inequity?
The Basic Issue: The CFO of an organization earns $300,000 per year. The Group LTD plan provides 60% of salary up to a monthly benefit maximum of $10,000 per month. This represents 40% of the CFO's salary, a far cry from the 60% protection those employees earning less than $200,000 enjoy.
The problem would be further exacerbated if any incentive compensation is included in his income as well. The question becomes, how can the company provide equal protection for the CFO and his peers earning in excess of the $200,000 insurable LTD income?
Through a Benefit Equalization approach, the additional 20% of coverage needed to rectify the CFO's under insurance problem may be procured through an individual disability policy. Depending on the size of the affected peer group, most or all of the additional benefit needed might be obtained under a guarantee issue program, with no medical or financial underwriting necessary.
To learn more about the Benefit Equalization component of a Comprehensive Disability Income Protection plan, please review the following presentation located at the bottom of this page and feel free to contact our office for additional information.
