Group Long Term Disability (LTD): FAQs
Are Disability benefits taxable?
Generally, if the employer pays the premium, Long Term Disability benefits are considered taxable income to the disabled employee. If the employee pays the premium, benefits can be tax-free. There are, however, special circumstances that need to be considered when a school switches from a non-contributory plan to one that is employee-paid. Those include:
- The date of the switch (ideally should be on the policy anniversary date or the date the school's coverage is moved to a different insurance carrier)
- Whether or not the LTD plan has a provision that provides additional benefits to insure the employer/employee contribution to the school's pension plan
- How the payroll taxes on the employee-paid premium are handled
When should I file a Long Term Disability Insurance claim?
Do not wait until the end of the LTD plan's elimination period to report a potential claim! LTD claims should be reported no later than the midway point of the elimination period. If a school has a plan with a 90-day elimination period, the claim should be reported after the employee has been disabled four weeks. Reporting the claim early allows enough time to complete and file the paperwork by the end of the elimination period. It typically takes an insurance company 2-4 weeks to adjucate a LTD claim. Delaying reporting a claim until the end of the elimination period means that an employee would not get his/her first disability check on a timely basis.
What happens if an employee becomes disabled during the summer?
A disability that has an onset date during the summer months should be covered as if the employee had become disabled during the academic year. But, you need to check your LTD policy language to be certain. If your school has ISM's LTD (or STD) coverage, our policies consider all employees to be 12-month employees. A claim with an onset date during the summer would be eligible as long as the employee was under a 12-month contract (September through August) or under a 10-month contract and the employee has a signed contract for the following academic year.
How much does LTD Insurance cost?
Rates are contingent on the demographics of your school's faculty and staff. The IS/IT Trust is experience rated, with rates based on a lower than average incidence and duration of disability in the private-independent school world.
What information do we need to give ISM to get a proposal?
All we need is a census of benefit-eligible employees including date of birth, gender, job classification, and annual salary. So that we can reconcile the census, we also ask for a current copy of your school's list invoice for the in-force plan (if existing). Frequently, we find schools are still paying premiums for employees who've left the school, or employees who should be enrolled for coverage but are not. We also need a copy of the school's in-force LTD plan (if any) employee certificate booklet.
To find out more about ISM's LTD Insurance services for private-independent schools, e-mail Lori Leonard, or call 302-656-4944.
The Independent School Group Life and Disability Insurance Trust (IS/IT) is underwritten by Union Security Insurance Company, rated "A" (Excellent) by A. M. Best. Products and services marketed by Assurant Employee Benefits are underwritten and/or provided by Union Security Insurance Company.