LTD benefits and premium amounts depend on an employee's monthly salary.
- Benefits are usually up to a fixed maximum set by the plan, for example: 50% of monthly salary, to a maximum benefit of $5000.
- Salary amounts are rounded per thousand for insurance carriers that round salary.
- Some carriers will round the final volume and not the salary.
- Premiums are calculated based on total monthly salary, not the benefit amount.
- Benefits are treated as post-tax by default, but there may be situations where administrators ask employees if they prefer pre-taxdisability benefits. However, these situations are rare, and paying benefits as pre-tax is not advised.
- The volume in Zenefits is based on the amount of benefits an employee will receive, however, the carrier may reflect the full monthly/weekly salary instead of the amount the employee will receive.
Bob earns $60,500 annually. His carrier rounds down to the nearest thousand ($60,000), so his monthly salary (for the purposes of calculations) is $ 5 ,000.
- His plan design is 60% of monthly earnings, up to a $ 6 ,000 monthly max benefit (which corresponds to a maximum monthly salary of $10,000)
- His rate is .30/$100.
According to the plan design:
- His monthly benefit amount is (.60 x $ 5 ,000) = $3000.
- His monthly premium is ($ 5 ,000 x . 30 / $100) = $15.00.
Remember, even if the employee makes more than the maximum benefit, the premium is still limited by the maximum monthly salary. So, if his monthly salary was $13,000, for the same plan:
- His monthly benefit amount is (.60 x $13,000) = $ 6 ,000 (maximum).
- His monthly premium is ($10,000 maximum monthly salary x . 30 / $100) = $30.00.