SOURCE: Jim Mooradian and Associates

February 13, 2009 17:35 ET

Understanding Group Long-Term Disability Plan Is Vital, but Employers and Employees Often Don't, Jim Mooradian Writes in Employee Benefit Plan Review

BOSTON, MA--(Marketwire - February 13, 2009) - Group long-term disability insurance can save employees from financial ruin, but most of them -- and even some HR pros -- don't understand their plan, write Jim Mooradian and Chris Allen of Jim Mooradian and Associates in Boston in the January issue of Employee Benefit Plan Review.

"This can lead to problems and unfulfilled expectations when there is a claim," they write.

Understanding the policy's definition of disability is crucial. The "own occupation" definition provides eligibility if the employee becomes unable to perform the specific duties of the job that he or she was performing at the time of his disability. Under the stricter "any occupation" definition, an employee would have to be unable to perform the material duties of any occupation for which he or she is reasonably suited, given his or her training and experience.

Many LTD contracts offer own-occupation coverage for two years and any-occupation coverage from two years through the life of the claim.

Some plans cover base salary only; some include other types of income such as bonuses and commissions.

"Your company must think this area through carefully when the LTD plan is implemented, as it can dramatically affect someone's benefit in relation to total compensation," they write.

Putting more compensation into the definition of covered earnings doesn't necessarily mean larger benefits.

"This can be true in some circumstances, but such a tactic can also cause claim problems depending on the timing of bonus and commission payments, the company's tax entity status, and whether any income will be derived after the start date of a claim," they write.

The key: make sure you understand your LTD plan before the claim.

Their article "Do Your Employees Understand Your Company's Disability Plan? Do You?" is found on pages 11 and 12.

Jim Mooradian and Associates in Boston is a full-service insurance brokerage firm specializing in supplemental insurance programs, including voluntary benefits and supplemental disability programs. Web: www.jmooradian.com.

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