How do I calculate benefits and premiums for long-term disability?
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.
Thank you for the feedback!