In my last post, I covered the integration of PFML and employer paid STD plans. That post, linked here: https://www.millbrookbenefits.com/integration-of-pfml-and-group-disability-plans-employer-paid-std/, provides much of the background information necessary for this discussion. I won’t re-type it here, but it’s worth a read if you didn’t see it before.
All of our integration posts will have the same 3 broad categories of options, and employer paid long term disability (LTD) is no exception:
- Keep it without making any changes
- Modify it to better dovetail with PFML
- Cancel the plan completely
We’ll take each in turn, but once again, I’ll start with the last one.
Cancel the Plan Completely
Cancelling the plan completely will probably not make much sense. As mentioned in the last post, anyone earning more than roughly $66,000/year is not fully covered by the PFML plan. In addition, employees could exhaust their PFML on a family member and not have any paid time available for their own sickness if it happens in the same rolling 52 week period.
However, the LTD cancellation makes even less sense knowing that the maximum duration of the PFML plan for one’s own sickness is 20 weeks. If you still believe that long term income protection for your employees is important, then cancelling your LTD plan won’t make any sense at all.
In addition, if you have employees working in other states, they may not have access to similar statutory coverage.
Finally, most of the LTD insurance companies are expecting to be able to offset for PFML in the same way they will with STD, so if your elimination period is less than 147 days (PFML 7 day waiting period + 140 days of maximum PFML payout), there may be a slight discount to your rate.
Keep the Plan Without Making Any Changes
This could be a very reasonable option for several reasons, some noted above:
- As mentioned multiple times, employees could use up their PFML on a family member.
- If you have employees working in other states, you will likely want to maintain your LTD plan for consistency across all states.
- There may be a slight discount to your rate.
- If you don’t have STD, keeping your LTD plan in place, particularly if the elimination period is shorter, will give your employees continued access to income protection within a reasonable timeframe.
Modify the Plan
The modification that makes the most sense to me is to move your elimination period (the time an employee has to wait before benefits begin) out to 147 days (see math above) if your insurance company has the ability to do it. This would create a nice fit with the maximum duration of PFML, assuming the sick employee didn’t use any of his or her PFML time for a family member.
In my opinion, maintaining the LTD plan, with or without modifications, will make the most sense for most employers as we head into January of next year.
If you’d like to discuss your disability plans and how to integrate them with MA PFML, give us a call at 866-724-0008. You could also click the link below to register for our 30 minute webinar on Wednesday, March 25 at 8:30 and 12:30.
