FAQs About Short-Term and Long-Term Disability Coverage

Both short-term disability (STD) and long-term disability (LTD) have specific nuances that apply to them.

Short-term Disability

Short-term disability kicks in immediately when an employee is injured, but there is typically a waiting period of up to seven days before it kicks in for illness. STD coverage lasts the entirety of the established short-term policy which is often under 90 days.

Example

An employee enrolls in a short-term disability plan with an 90-day short-term policy, then gets injured. The employee is entitled to STD coverage for up to 90 days.

Long-term Disability

Long-term disability typically has a longer waiting period before it begins for both injury and illness. If LTD coverage is paired with STD coverage, the long-term disability will usually kick in when the short-term disability ends. However, for employees who are only participating in LTD coverage, the waiting period can be anywhere from 3-6 months before their coverage kicks in.

Example

Another employee at the same company purchases both short-term and long-term disability coverage. The employee's disability period lasts beyond the 90-day short-term limit so their LTD coverage begins as soon as their 90 days of STD coverage ends.

Zenefits supports both basic and voluntary plans for short and long term disability insurance. Employees may sign up for single or multiple plans.

  • Basic STD and LTD plans in Zenefits are 100% employer-paid.
  • Voluntary STD and LTD plans in Zenefits are 100% employee-paid

Single Plans

  • 1 Basic STD
  • 1 Voluntary STD
  • 1 Basic LTD
  • 1 Voluntary STD

Multiple Plans

  • 1 Basic STD and 1 Voluntary STD (with the same carrier and effective date)
  • 1 Basic LTD and 1 Voluntary LTD (with the same carrier and effective date)

STD benefits and premium amounts depend on an employee's weekly salary.

  • Benefits are usually up to a fixed maximum set by the plan, for example: 60% of weekly salary, to a maximum benefit of $1500.

  • Salary amounts are rounded according to the carrier's rules, e.g., 52,500 rounded to 52,000.

  • Premiums are calculated in two ways, depending on the carrier:

    • Benefit amount / (10 * Rate)

    • Weekly salary / (10 * Rate)

  • Benefits are treated as post-tax by default, but there may be situations where administrators ask employees if they prefer pre-tax disability 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.

Example

Bob earns $52,500 annually. His carrier rounds down to the nearest thousand ($52,000), so his weekly salary (for the purposes of calculation) is $ 1 ,000.

  • His plan design is 60% of weekly earnings, up to a $1500 weekly max benefit.
  • His rate is .225/10.

According to the plan design:

  • His weekly benefit amount is (.60 x $1000) = $600.
  • His monthly premium is ($600 x .225 / 10) = $13.50.

Remember that even if an employee's weekly salary exceeds the maximum weekly benefit, their benefits and premium are capped by the maximum benefit. For example, if Bob earned $5000 weekly, but kept the same plan outlined above:

  • His weekly benefit is capped at $1500 (the plan's max benefit is $1500).
  • His premium is capped at $33.75 ($1500 x .225 / 10).

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.

Example

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.
State disability insurance (SDI), or “short-term disability coverage,” is required in the states of California, Hawaii, New York, New Jersey and Rhode Island. Companies with employees performing work in these states must either provide, or facilitate the procurement of, short-term disability insurance to those employees. The short-term coverage is required to cover, among other things, non-occupational disabilities and pregnancy.

 

The rules vary from state to state.  In California, SDI is paid for through employee paycheck deductions. In New York, an employer may obtain private coverage or purchase coverage through the state fund to meet the obligation.

 

These plans are not supported on the Zenefits platform. However, your company may be subject to fines if you do not offer these plans to employees residing in the states mentioned.  Please contact the following resources to stay compliant and/or set-up new coverage if needed:

 

California SDI — State Disability Insurance

http://www.edd.ca.gov/eddhome.htm

English (800) 480-3287

Spanish (866) 658-8846

 

Hawaii TDI — Temporary Disability Insurance Law

http://hawaii.gov/labor/ dcd/abouttdi.shtml

(808) 586-9161

 

New Jersey TDB — Temporary Disability Benefits Law

http://lwd.dol.state.nj.us/labor/tdi/tdihome.html

(609) 292-7060

 

New York DBL — Disability Benefits Law

http://ww3.nysif.com/

(888) 875-5790

 

Rhode Island TDI — Temporary Disability Insurance Act

www.dlt.ri. gov /tdi

(401) 462-8420


Zenefits is not able to file an STD or an LTD claim with the carrier or the state (if the state offers such programs and the employer does not offer STD coverage).

The employee or admin will want to contact the carrier or the proper state organization to get more information about filing claims (sometimes, this info is included in the SBC). Here is an example of a state-funded disability program (CA).
Handling medical, dental, and vision deductions while an employee is on STD or LTD is completely dependent on the company-wide policy. If the employee is collecting a benefit from their disability policy they do not have to pay their disability premiums, but their medical, dental, and vision premiums are still subject to be collected.  There are four options below on how companies can decide to collect premiums while an employee is on leave. Please note, whichever option is selected is required to be a company-wide policy and cannot be changed on an  individual basis. (I.e. all employees who are out on disability will have their medical, dental, and vision premiums collected the same way.)

Options for handling deductions while employees are on disability (STD or LTD):
  • The employee can pay the deduction amount upfront before going on their STD/LTD.
  • The employee can pay during the STD/LTD (if they are still getting paid).
  • The employee can provide a check to the company during leave if it is unpaid.
  • The employee can pay the amount in bulk or via catch up deductions when they return to work.
California State Disability Insurance (SDI) is a partial wage-replacement insurance plan for California workers. The SDI program is state-mandated and funded through employee payroll deductions. 
California is one of several states that requires workers to be provided with disability insurance. If you do not participate yet or are unsure, then you may visit this page for more details.

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