The Long and Short of Disability Benefits

Workers typically do not anticipate missing extended time from work due to an accident or unexpected illness. However, this is a real possibility. Currently, one in four 20-year-olds will become disabled before reaching retirement age. As part of their benefits strategies, organizations are providing a safety net for workers by offering short- and long-term disability benefits. In the International Foundation’s Employee Benefits Survey 2018, respondents communicated specifics of their short- and long-term disability benefits, including service periods for eligibility, elimination, waiting periods for accidents and illnesses, calculation formulas, durations and funding arrangements.

If a worker goes on disability leave, which benefits are impacted? Organizations commonly continue to offer health care benefits (66.7%), life insurance (60.7%), pension plan accruals (25.3%), employer contributions to DC retirement plans (17.3%) and vacation benefits accrual (15.0%). Those that offer health care as part of their disability benefits most often do so for the entire period of the disability (28.4%), followed by six months (24.3%) of coverage.

Short-Term Disability Benefits

Employee Benefits Survey 2018

  • Short-term disability (STD) benefits are offered by 78.2% of responding organizations (It should be noted that organizations responding that they do not offer STD benefits were asked if these benefits were state-mandated. Overall, 31.3% of those that do not offer STD benefits are in states where temporary STD benefits are mandated.)
  • About one in three (32.3%) responding organizations require no service period for eligibility, while 27.4% require a service period of a month or less.
  • Those that offer STD benefits were asked whether there were differences in the elimination and waiting periods for illnesses and accidents. More than seven in ten (71.6%) stated that elimination and waiting periods do not differ for each disability classification. The remaining 28.4% make the elimination period different for accidents and illnesses.
  • The most common elimination/waiting period for STD benefits is seven days (44.1%), followed by 14 days (12.6%).
  • When it comes to calculating STD benefits, about three in five (58.1%) responding organizations use a fixed percentage of earnings. Most often, the fixed percentage is 60% (46.3%) or 100% (14.3%) of earnings.
  • More than 25% of responding organizations use a fixed dollar amount for their STD benefit calculation.
  • The most common duration of offered STD benefits is 26 weeks (54.3%), followed by 13 weeks (21.1%).
  • Most often, organizations completely self-fund (53.7%) their STD benefits (i.e., no stop-loss insurance). More than one in three (38.0%) responding organizations fully insure their STD benefits, while 8.3% self-fund with stop-loss coverage.

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Long-Term Disability Benefits

  • Long-term disability (LTD) benefits are offered by more than two in three responding organizations (67.1%), a benefit more commonly offered by corporations and public employers than multiemployer plans.
  • More than three in ten (30.1%) responding organizations require no service period of eligibility, while 25.1% require a service period of one month or less.
  • The most common elimination/waiting period for LTD benefits is six months (48.8%), followed by three months (31.5%)
  • The overwhelming majority of respondents calculate their long-term disability benefits as a fixed percentage of earnings (82.2%), most often 60% (70.7%).
  • About four in five (78.3%) responding organizations that offer LTD benefits do so until the age of 65 or retirement.
  • More than four in five (83.5%) of organizations offering LTD benefits fully insure them.

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Find more information on disability benefits—and almost any other employee benefit—in the Employee Benefits Survey 2018

Justin Held, CEBS
Senior Research Analyst at the International Foundation