How much do you know about what happens when an employee goes on long term disability (LTD) benefit claim?
Many employers aren’t sure about the details, such as whether the health and dental benefits continue indefinitely, or if the disabled employee is supposed to contribute toward the cost of their benefits. Plus, employers face the added stress of a dual responsibility to both the employee’s wellbeing and the company’s cost control.
Here’s what employers should do as soon as possible so they won’t be stuck asking these questions when faced with an employee going on LTD benefits:
Establish a Formal Continuation of Benefits Policy for Your Company
Typically, insurers won’t specifically address the issue of continuation of benefits, so it is up to you as the employer to determine your own policy. As long as a disabled employee is considered to be “employed”, they will continue to receive coverage.
You must create a formalized Continuation of Benefits provision that lays out how your company will handle this situation for any employee that becomes disabled and receives LTD benefits. By doing this, you’ll know that all of your employees will be treated fairly and equally. It will also leave no doubt as to how the situation is to be approached.
Some of the questions you will need to ask yourself when creating a Continuation of Benefits provision are:
Should health and dental benefits end for an employee who becomes disabled?
Disabled employees typically need their health coverage more than your active employees. What is your view, as an employer, about terminating benefits for an employee in that situation?
You must also consider whether continuing the benefits for disabled employees will affect your capacity to provide an affordable and competitive benefits program for active employees.
As you develop your policy it is important to keep the moral implications in mind as well as the financial impact.
Will you require employees on disability to pay their portion of the health and dental premiums?
If so, you should establish a process for collecting the premiums, such as using postdated cheques.
You must also decide whether you are willing to terminate the health and dental coverage if the disabled employee does not pay their portion.
If you are going to continue benefits for disabled employees, how long will you continue them for?
If you decide you would like to continue benefits for disabled employees, you have some options for how that will work. You could:
- Continue the benefits on the same basis as if the disabled employee was an active employee.
- Provide benefits for a specific period of time (e.g. two years from the date the employee becomes eligible for LTD benefits).
- Provide benefits based on years of employment. You can decide on an appropriate schedule for your company. Here is an example schedule:
|Length of Employment||How Long Health and Dental Will Be Continued|
|Up to 3 years||6 months|
|3 to 5 years||12 months|
|5 to 10 years||24 months|
|More than 10 years||36 months|
What are the legal implications of your policy?
To remove a disabled employee from your health and dental plan, you must terminate their employment. Review relevant legislation in your province to make sure you don’t run into any legal repercussions when terminating a disabled employee.
You may have certain obligations with terminating an employee, such as giving notice, giving severance, etc. Please check with your insurer to determine what is the process for having benefits continue when the employee is no longer actively working, as well as what specific benefits will be available.
Also note that Worker’s Compensation legislation may have specific guidelines for continuing coverage for disabled employees, so be sure to check the requirements.
If you have not yet established a policy and you have an employee who is currently on long term disability, you should seek legal counsel before taking action. In this case, existing arrangements are usually grandfathered in order to avoid litigation.
Determine Your Company Policy based on Values and Capability
Your continuation of benefits policy will ultimately be determined by:
- The ongoing financial resources you are willing and able to commit to disabled employees
- Your corporate and moral responsibility to provide coverage for employees during extended periods of disability
- The result on employee morale and attitudes that a continuation of benefits policy would have
Formalizing a continuation of benefits policy may require difficult decisions, but in the end it will ensure that all employees are treated equally and fairly; it’s essential for both the employer and employees to understand how the company will respond if an employee becomes disabled.
>> Hynek Financial Group provides employee benefits solutions to meet your company’s needs. Get in touch with our advisors today to discuss how we can build the right solution for you.
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