The Implications of Long-Term Disability Leave for Employees

Life is uncertain, and anyone can experience unexpected challenges. One of them is severe injury or illness, which could result in an extended absence from work called long-term disability. 

Employers must closely examine long-term disability insurance as an essential part of their benefits portfolio. Why? Because many business owners struggle with resolving issues arising from an employee's long absence from work due to illness or injury. 

Apart from the employee struggling with income loss, the employer will also face issues with compensation decisions regarding the individual during their absence, not forgetting compensation investments that must be made to fill the gap left behind by the individual’s absence. 

In this article, we will explore the impacts of disability leave on employees, legal options, insurance coverage, and how employers can provide long-term disability insurance.

What is long-term disability?

Long-term disability is an insurance benefit where employees are paid about 50% to 70% of their salary if they can't continue working for a long time due to debilitating injury or chronic illness. 

That being said, disability leave impacts companies as their productivity might be affected. Employee long-term absence can also be detrimental to a company's health. This is why managing long-term disability is essential. And this can be done through a long-term disability insurance policy. 

Now, the long-term disability benefits start from where the short-term disability ends, which is usually about 10 to 53 weeks after the first disabling event. The length of long-term disability coverage usually depends on the particular policy but it could last for about five to 10 years or until the person gets to 65 years of age. The extended term-term disability policy can either be paid by the employee and the employer or shared by both.

Apart from pre-existing conditions, which are not usually covered by long-term disability policies, some conditions that can qualify a person for long-term disability coverage include cancer, mental health issues, injuries after an accident, stroke, epilepsy, and carpel tunnel syndrome. 

Why is long-term disability significant?

With long-term disability insurance, you can protect your employees' financial stability and health in the event of an illness or disabling event. Other additional benefits of long-term disability insurance include:

• It is tax-free.
• It doesn't impose restrictions on how it is spent.
• Employees can preserve their retirement savings until they are 65 years old.

Similar to how businesses offer generous paid time off (PTO) policies, retirement plans, and comprehensive health insurance, companies can offer long-term disability insurance to mitigate employee turnover and enhance employee loyalty. 

Employee’s legal options on long-term disability

Individuals who face severe disability might not be able to work for long periods. Though some with disabilities can work with reasonable accommodations, as stated by the Americans with Disabilities Act (ADA), many individuals cannot work at all. If you cannot work due to disability, your options include long-term disability benefits, Social Security Disability insurance, and workers' compensation benefits. 

For instance, only individuals who are disabled due to an injury sustained on their job can access worker's compensation benefits. Employees with considerable work history who have experienced severe long-term impairments precluding significant gainful work can be eligible for Social Security Disability insurance benefits. However, this isn't important in this context where the work caused the impairment. 

Some employers offer long-term disability insurance as part of their comprehensive employee benefits package. This is usually governed by the 1974 Federal Employee Retirement Income Security Act (ERISA). The government made this law to offer safeguards regarding employee benefit programs, including disability insurance. 

When the ERISA plan governs your plan, and you are in dispute with the insurer about your due benefits, your present right, or your right to future benefits, you need to deplete the administrative remedies before you file a lawsuit in federal court. 

Usually, your insurance policy contains language setting the time limit for filing a suit. The ERISA can be very complex, so you must consult a lawyer specializing in ERISA if your insurer needs to meet its obligations under the policy. 

Additionally, you can buy an individual long-term disability plan from an insurance agency. The benefits of these policies begin when the employee loses his revenue due to an inability to work for an extended period due to an accident, injury, or illness. 

However, you must note that individually bought policies are also covered by state law. So, if you feel your insurer hasn't lived up to the expected obligation under the policy, you can file your lawsuit in a state court. Additionally, due to the diversity of jurisdiction, the insurer can take the case to a federal court. 

Insurance coverage for long-term disability

Every long-term disability insurance policy has its conditions for payout, diseases or previous conditions that might be excluded, and several other conditions that will make the policy less or more valuable to an employee. Specific policies pay disability benefits when an employee cannot work in their current job. For others, the employee is expected to take any job they can do. This is a big difference and is consequential to the employee. 

Long-term disability insurance is an essential part of a comprehensive employee benefits package. Experts view long-term disability insurance coverage as vital to an employee as life insurance is. So, employees must carefully examine their employer's policy to ensure it meets their standards. If more is needed, the employee becomes responsible for buying their expanded coverage, which might be cheaper if purchased through their employer's insurance carrier. 

How employers provide long-term disability insurance for employees

Employers usually provide and pay long-term disability insurance for their employees. There are different varieties of plans available that employers offer as a part of their comprehensive employee benefits package. When a company doesn’t provide long-term disability insurance or an employee needs additional coverage, they can buy individual plans from an insurance agency.

However, employees must note that long-term disability insurance is available through employers. It can be expensive to buy as an individual employee. Therefore, some employers who don't offer long-term disability insurance usually develop relationships with a long-term disability insurance company to create discounts for employees who want to buy a long-term disability policy. 

Since it is expensive for individual purchases, employee professional associations also offer long-term disability insurance policies at discounted rates. Additionally, the long-term disability insurance employers provide might be insufficient to meet the disabled employee's needs. This is another reason employees might consider getting added long-term disability insurance. Also, employees must note that payments from their employer's long-term disability insurance are taxable, but payments from an employee-purchased plan are not.

Endnote

Disability insurance is a crucial safety net that supports employees who get hurt and can’t perform their job requirements. Short- and long-term disability insurance serves different purposes depending on the employee’s situation.

As a business owner with employees, you must familiarize yourself with your legal obligations and your employees' responsibilities regarding both types of disability insurance.