It’s Time to Think About How to Integrate Your Disability Plans With Massachusetts PFML

It’s late May, and it seems like January 1 is a long time from now.  It’s not.  It’ll be here before you know it, and the start of the year will bring us the new Massachusetts PFML plan.  If you’re wondering if maybe they’ll delay it a bit due to the pandemic, I asked the question.  The answer was “No.”

With PFML coming soon, it’s time to start thinking about what you’re going to do with your disability plans.  I’ve been advocating for months about the need to make these decisions early, and we’ve just learned that 2 life and disability carriers are ready to quote integrated plans with solid rates for January 1.  More will soon follow suit.  Now that we can get real rates, we need to get this process started.

Previous posts have covered the background and specific strategies for employer paid STD and LTD plans:

Today I’d like to walk through a step by step thought process to help you consider these decisions:

  1. Decide if you’re going to keep your STD plan if you have one.
  2. If you’re going to keep your STD plan, decide if you’re going to modify it.
  3. Once you know what you’re doing with your STD plan, you can decide what to do with your LTD plan.

Decide if You’re Going to Keep Your STD Plan

On the surface, it seems like cancelling your STD plan is a no-brainer.  Why would I or my employees pay for something that’s going to be covered by the PFML?  This is a really important question, and I went into it in depth on the linked STD post above.  You may decide to cancel your STD plan, but it’s not as simple as it seems on the surface.  The PFML plan will have some shortcomings, potentially for all of your employees, but certainly those that earn more than $66,000/year.  Please read that post again, because it will walk you through the thought process.

If You’re Going to Keep Your STD Plan, Decide if You Should Modify It

I personally think this will make the most sense for many employers.  Potential modifications could be these:

  1. Set up a plan that only covers those earning more than $66,000/year.
  2. Alter your STD plan to match the PFML in elimination period and duration:  a 7 day elimination period with a maximum 20 weeks of duration if your carrier can do it.  I think most will.
  3. Replace your group STD plan with a voluntary individual STD plan that your employees can use to supplement the PFML.

Once You Decide on the STD, Decide on the LTD Next

The LTD decision will be partially decided by what you do with your STD plan:

  1. If you cancel the STD, and your LTD elimination period is less than 140 days, you might want to leave it unchanged.  There are also come carriers talking about an elimination period that will be something like this:  90 days or end of PFML, whichever is greater.  See linked LTD post above.
  2. If you are amending your STD plan to dovetail with the PFML, you need to move your LTD elimination period out to 147 days (7 day wait + 20 weeks of maximum duration).  At least one carrier is telling me they won’t offer 147 days, but they will do 150 days.  That’s probably fine.
  3. If you don’t have an STD plan, and your elimination period is greater than 140 days, you may want to reduce it to match PFML at 147 days, or maybe even drop it down to 90 days.

What if You Have Employees in Other States Who are not Covered by PFML?

If you have employees in other states that are not covered by MA PFML,  that obviously complicates the decision.  A growing number of states are implementing their own PFML plans, and it could become really cumbersome to try to dovetail plans with several different state PFML plans.  In this case, coming up with a strategy that works well for the majority of your people is probably the best approach.

For example, if an employer has the majority of employees in Massachusetts and others in another state not covered by MA PFML, they might be more inclined to explore repricing of current plans (STD is going to be REALLY cheap) to make sure all employees have continuous disability coverage.

Regardless the situation, it makes sense for us to start making these decisions sooner rather than later.  If we can get pricing well in advance, I don’t see any reason to delay the thought process, especially since many employers are already plenty busy with open enrollments in the fall.

We’re doing a webinar on this topic tomorrow at 8:30 and 12:30.  If you’d like to join us, just click the link below and fill out your information, and we’ll send an invitation.


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