A couple of our clients with employee paid short term disability plans have had questions from employees like the one above. They are wondering why in the world they’re paying for short term disability insurance AND Massachusetts Paid Family and Medical Leave at the same time. The question is a reasonable one. This post will cover a couple of thoughts that might be helpful.
Most employers in Massachusetts will need to determine what to do with their existing short and long term disability plans before the PFML benefits actually kick in on January 1, 2021. We will be publishing a series of posts on this topic in the upcoming weeks, but this date is important to share with employees. Unless you have a private plan exemption or your company has chosen to pay 100% of the PFML cost, your employees started payroll deductions for the PFML plan on October 1, 2019.
The reason contributions began in advance of the actual benefits start date was to create a claims fund for the state to draw upon when claims become payable. So, if you have an employee paid STD plan, the reason your employees are paying for both the PFML and STD right now is because of the following:
- They are contributing to the establishment of the state claims payment fund for the PFML.
- They are paying for disability insurance coverage now in case they get sick or injured before January 1, 2021.
Those employees that elected to enroll in your STD plan obviously felt the need to protect their income when they signed up. If they still think income protection is important for them, they should remain on the STD plan.
Things will get a bit more complicated as we approach the end of the year and the start of PFML claims. The following questions will need to be answered:
- Should I continue my STD coverage after January 1, 2021?
- What will the STD rates be in 2021? The rate HAVE to be much lower because the STD plans will have a new offset in the PFML, leaving the insurance companies with a dramatic reduction in claims liability.
- Should I restructure my STD and LTD plans to dovetail with the PFML elimination period and maximum duration?
I reached out to my reps from AFLAC and Colonial, common employee paid STD providers that use individual policies, and asked how they plan to work with existing policyholders to discuss potential changes. Both said they are planning to be available this year during re-enrollment periods to work with everyone who would like to make changes. I’d strongly recommend that your covered employees take advantage of these 1 on 1 meeting opportunities when they become available.
For those employers with group voluntary STD plans, our plan is to meet with every client this summer to discuss plan options and revised pricing for January 1. We will then meet with employees to let them know what their new pricing, plans, and options are. We will begin this process as soon as we can get solid rates for 2021.
If you have any questions about Massachusetts PFML or the integration of disability insurance plans with PFML, give us a call at 866-724-0008 or click the link below.