Many people that are fortunate enough to have a benefits plan through their employer (or their spouse’s) take for granted that the plan is adequate for their needs. That isn’t always the case. We can help you to understand exactly what your company benefits plan offers you, and where you might want to consider adding your own personal coverage.
In the event of an illness, many high-income earners rely on the long term disability coverage (LTD) in their group benefits programs to provide the necessary protection. Although many don’t consider purchasing additional disability insurance, a closer look at group LTD coverage often reveals significant gaps in coverage.
The concept of ‘reverse discrimination’ relates to the fact that under the typical group benefits plan, executives may receive lower LTD benefits in relation to their total compensation, than other employees. The resulting ‘reverse discrimination’, where income replacement ratios may drop as compensation increases thereby reducing the level of income protection, is not a well understood aspect of some of today’s LTD plans. Reasons for this include:
Group LTD plans have stated maximums that vary depending on the size and earnings of a group. These are designed to adequately insure the group as a whole, but may not be designed to provide the coverage an executive client needs.
The income used to determine benefit calculations is defined in the group plan and often does not include the many varieties of executive compensation (such as bonuses, commission, pensions, profit sharing or stock options).
- Many employers are unaware of the differences between group and individual plans and are often not familiar with the options available when they develop their employee LTD plan.
In addition to increasing insurance coverage through personally-owned policies, there are options to help reduce gaps in the desired level of coverage of an employee’s health care plan. High deductibles, low maximums, or desired coverages not offered by the company plan can all be coordinated with a supplementary, personally-owned health care policy.