Managing Short-Term Disability Benefits
Short-term disability benefits are a key part of employee benefits. This article will cover the types of benefits employees may have access to and how to manage them. It will cover the effect of the benefits on both employees and the employer as well as the role of HR in their administration. Read on to learn more about eligibility requirements, types of benefits and their effectiveness, and how to decide on self-administration or third party administration.
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What Does The Law Define As a Disability?
The ADA definition of a disability is: “a mental or physical impairment that substantially limits one or more major life activities.” Some disability benefits mirror this definition, while others are more restrictive or less restrictive. Pregnancy and childbirth are not covered under the ADA definition, but many short-term disability benefits cover those conditions under their medical care and leave entitlements.
What Are Disability Benefits?
Disability benefits are protection given to employees who are unable to work because of an accident or illness. This protection can come in the form of job protection, income replacement, or even leave entitlements. Depending on the benefit, it could cover permanent or temporary impairments.
Why Offer Disability Benefits?
The millennial workforce puts a higher emphasis on feeling valued by their employer, therefore benefits play a big part in recruiting and retaining talent. Offering benefits can sweeten the deal without increasing the base salary of a role. Disability benefits are attractive because even a short-term disability would be financially devastating to most employees. Employers can reap the benefits of a more job-secure workforce for very little cost.
What Is HR’s Role in Disability Benefits?
HR is the middle man between the employer’s needs and the employees’ needs. Therefore, HR plays a vital part in developing and administrating disability benefits. They will be involved in the following functions:
- Establishing the objective of the disability benefits
- Liaising with the legal team to identify legal requirements
- Creating a benefits plan
- Co-ordinating with benefits brokers to find the correct products
- Collating information about eligibility requirements and duration of benefits
- Creating information about how employees request disability benefits
- Addressing any issues that arise in the benefit administration
- Creating policies and communicating them to staff
- Communicating any changes to the policies
Types of Disability Benefits
There are a number of different benefits employees can apply for. Here are some of the most common types of disability benefits:
Short-Term Disability Insurance
Short-term disability insurance plans will cover part or all of an employee’s income if they cannot work. This benefit does not protect an employee’s job, and the employer’s internal policies will govern whether the employee will be reinstated after their leave. Federal laws like ADA and FMLA will also govern an employee’s job protection depending on the type of short-term disability.
Usually, a short-term disability plan has a short waiting period before the benefits begin as a paid time off program can cover short absences. The waiting period discourages abuse of disability insurance. Paid sick leave can be co-ordinated with any income benefits to cover all or some of the employee’s base pay. The supplementation of short-term disability insurance with other benefits and paid leave is at the employer’s discretion.
In California, disability income plans are required by law.
Long-Term Disability Insurance
Often, employers will offer their long-term disability benefit plans to follow after a short-term disability plan. When the short-term disability benefits end, then the employee will move onto the long-term disability benefit plan if they still require benefits. For employees who face permanent disability, the plan might continue until their retirement or until they are eligible for Social Security disability benefits.
Most long-term disability benefit plans have a waiting time of 3-6 months, so the employee uses a short-term disability plan, to begin with. A long-term disability plan does not provide any job protection for employees, and the decision to reinstate them after their leave is subject to the employer’s policies and state and federal laws.
Long-Term Care Insurance
Long-term care insurance provides benefits for disabilities and chronic illness that renders a person unable to care for themself. This can include nursing homes and assisted living facilities, hospice care, home health care, adult daycare, and respite care. Long-term care insurance helps the family to afford these care options. These benefit options are becoming more popular with the ageing baby boomer population who will require them in the future.
An employer can choose a qualified plan or a nonqualified plan for long-term care benefits. A qualified plan is treated as health insurance, and money received in benefits is not taxed as income. A nonqualified plan is treated as personal expenses, and amounts are not tax-deductible.
Critical Illness or Supplemental Insurance
These policies pay employees a fixed lump sum payment after they have been diagnosed with an illness listed in the policy. These often include stroke, cancer, kidney disease, and heart attack. Some policies may include per-day payments for medical care, chemotherapy, or hospitalization.
The benefits are paid directly to the employee and may be used as the employee sees fit. They help protect employees from the astronomical costs that serious injuries and illnesses incur.
Employer Support
Another popular benefit option employers can provide is support in navigating benefits, health insurance, and even treatment options. They can provide access to information portals, hotlines, or even consultations with professionals who can make the process easier.
Disability Leave Benefits
Under a disability benefit plan, employees can claim leave as well as income replacement. Some laws mandate the amount of leave employees are entitled to, but the employer can also provide additional leave benefits if they wish. Here are the legally mandated leave benefits.
Federal Laws
FMLA entitles employees to up to 12 weeks of unpaid leave during a 12 month period for the birth or adoption of a child, for medical reasons, or to care for a parent, spouse, or child with a serious health condition.
ADA entitles employees to reasonable accommodations for their disability. Reasonable leave from work is considered a reasonable accommodation as long as it does not create undue hardship to the employer.
State Laws
Check your state laws to see if they provide regulations regarding employees with disabilities and family medical leave. California has paid sick leave laws that are more generous than federal laws.
Employer Policies
Employers are permitted to develop policies which offer more generous paid leave than federal laws.
Legal Issues
Americans with Disabilities Act
The ADA provides protection to people with disabilities and allows them to work and contribute to society. It protects people with disabilities in the workplace, transportation, telecommunications, and government services.
Under the ADA, employers larger than 15 employees are prohibited from discriminating against disabled workers in any of the following areas:
- Recruitment
- Compensation
- Training
- Advancement
- Firing
- Any other privileges or terms and conditions of employment
Employees must also be allowed to work with employers to seek reasonable accommodations that allow them to perform their duties.
Family and Medical Leave Statutes
The FMLA provides eligible employees with 12 weeks of unpaid leave within a 12-month period to be used for the birth or adoption of a child, for their own medical conditions, or to care for a close family member with serious medical conditions. This is applied to employers with over 50 employees and requires employers to reinstate the employee to the same or equivalent position when they return. There are very few exceptions to this reinstatement requirement, and there are no provisions to the FMLA for employer hardship.
Workers’ Compensation
Workers’ compensation is mandatory in most states and benefits both employers and employees. Employers benefit from limited liability for injuries or illnesses on the job, and employees benefit from medical and wage-loss benefits.
Temporary Disability Benefits
California is one of the few states that have temporary disability benefits laws. They have increased the insurance amount recently, so check with your lawyer to ensure you are still compliant.
Social Security Disability Benefits
When a person has a medical condition that prevents them from working and will last at least one year or will result in death, they can receive Social Security disability benefits. These benefits are not given for short-term disabilities or partial disabilities.
Social security offers the following incentives that are designed to encourage those with disabilities to work:
- A nine-month trial period that allows individuals to test their ability at work.
- After the trial period, individuals have a 36-month time period where they will still receive benefits in months where their earnings were not substantial.
- A five year period after their benefits cease, where if individuals can no longer work, they can immediately start benefits.
- Free Medicare Part A coverage lasts at least 93 months after the trial period is over. After that, individuals can pay a monthly premium for continued Medicare Part A coverage.
- When calculating benefit eligibility, disability-related expenses may be deducted from the monthly earnings.
Other Employment Laws
Many states have laws pertaining to workers with disabilities. Check with your lawyer to ensure you are considering all the applicable statutes in your policies.
Global Disability Issues
HR professionals in a company that operates in a number of countries and regions will need to take into account the different disability laws. In some cases, different regions may require different policies and plans to ensure legal compliance. When in doubt, employ an international labor lawyer to ensure your policies are compliant.
Communication Strategy
Employers must communicate their disability benefits plan and any changes to their employees. Here are some tips when communicating:
- Develop a communications strategy that takes into account the audience, communication method, themes, and language.
- Where possible link the benefits plan to your organizational culture and values. The plan should be seen as an extension of the culture.
- Develop slogans and themes to help communicate the benefits.
- Select managers and employees to champion the employee benefits and will be listed as the contact for feedback.
Your communication strategies should be unique to your company and be similar to your current communications methods.