Both short-term disability (STD) and long-term disability (LTD) have specific nuances that apply to them.
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 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.
STD benefits and premium amounts depend on the 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 their workers if they prefer pre-tax disability benefits.
The volume in Zenefits is based on the amount of benefits an enrollee will receive, however, the carrier may reflect the full monthly/weekly salary instead of the amount the worker will receive.
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.
According to the plan design:
Remember that even if the 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:
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.
According to the plan design:
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:
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
What is a gross up disability plan?
Gross up disability plans are set up as basic (employer paid) Short Term or Long Term Disability plans, and look the same in terms of plan details as all other basic STD or LTD policies. What makes them different is that the employer-paid premium is considered taxable income to the employee so that when the benefit is paid through a claim, that benefit is not considered taxable income to the employee.
With traditional STD and LTD policies where the premium is paid by the employer, claims that are paid to the employee through the policy are considered taxable income.
Examples
Example 1:
George's company has a Gross Up STD/LTD policy. They pay his $10 per month basic STD premium. Since it is a gross up policy, George would see a taxable line item on his paystubs of $10/ month . George pays the tax on that $10 as if it were money paid to him (taxable income).
George files a claim for STD, and is paid by the insurance carrier. These funds paid to him are not taxable income, and he is able to pocket the full claim amount.
Example 2:
Joe's company has a traditional employer-paid STD/LTD policy. Joe's company has paid his $10 per month basic STD premium and Joe hasn't paid any tax on that premium. In fact, Joe may not even be aware of what his STD premium is, he just knows that his employer is paying it.
Joe files a claim for STD, and is paid by the insurance carrier. All of the funds paid to Joe are considered taxable wages, and he's responsible to make sure he declares it as income and pays taxes on those funds. Most employers will coordinate these tax payments in their payroll system when the insurance carrier notifies the employer of claims that have been paid every quarter.
Traditional or gross up STD/LTD plans appear the same way in terms of benefits details in Zenefits. Contact your insurance broker if you have any questions regarding your STD/LTD policy, and if it is structured as a gross up policy. Gross up policy options are only available for STD and LTD, not life insurance.
If a group policy is written as a gross up policy, administrators need to contact their payroll provider to coordinate proper employee taxation of the premium directly in their payroll system. Zenefits does not currently support coordinating payroll taxation of gross STD and LTD benefits.
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