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Work: Benefits Offered By Employers

Income Replacement Programs: Sick Leave, Short Term Disability, Group Long Term Disability

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Most employers offer a range of benefits to cover all or a part of your salary if you become unable to work.

Sick Leave

Most employers offer time off in the event of illness.

  • Each employer determines the number of days of sick leave allowed per year, whether and to what extent the sick days are accumulated and related rules such as whether a doctor's note is required, whether partial days can be taken, how much notice is required and to whom.
  • Some employers will offer a set amount of sick days at the beginning of each calendar year, such as ten days of sick leave. In such a plan, an employee will be able to take up to ten work days off during the year for illness.
  • Other employers offer a set number of days per month or a period of months.

Some employers allow all or a certain number of unused sick days to be carried over from year to year. Others don't permit any carryover.

If you anticipate needing more time off than permitted under an employer's sick leave, see Paid and Unpaid Time Off and Family and Medical Leave Act.

Short Term Disability

Many employers offer short term disability coverage for illnesses that require more time off than allowed as sick leave.

  • Sometimes these programs are insured and at other times they are self-insured by the employer.
  • The plans usually have a waiting period that requires using all your sick leave days before the plan starts to pay benefits.

Short term disability benefits seldom cover an employee's full salary. Rather they tend to cover a percentage such as 60% or 66 2/3rds of your salary. These plans often have a dollar maximum.

Benefits typically last from three to twelve months. For employers offering Long Term Disability coverage (see below), the period of the short term plan is generally set to cover during the waiting period until the long term disability coverage starts replacing income.

Five states (California, Hawaii, New York, New Jersey, and Rhode Island) plus Puerto Rico require short term coverage for most employees of private industry. See Disability -- State Mandated Plans.

Group Long Term Disability

Generally these plans provide an income of 60% of your compensation if you become disabled. Some large companies offer less of a benefit, say 50% of salary, and allow employees to purchase an additional 10% to bring the benefit to a total of 60%.

If offered:

  • The employer usually pays all the premium for long term disability insurance.
  • There is generally a waiting period of six months from the time an employee becomes disabled and the time the long term disability payments start.

Long term disability income replacement coverage is almost always provided without any health questions asked if you sign up when you are first eligible so your health condition is not important. However, if you wait to sign up later, or even try to increase the amount of the benefit, there will likely be health questions that could keep you from getting the coverage.

Some larger employers will let employees choose to pay long term disability premiums with after-tax dollars. This may seem like a good deal for an employee with no health history, but it can be important if your chance of becoming disabled is greater than average. If you pay with after-tax dollars, all the income you receive under a disability income policy is tax free.

To learn more, see Group Long Term Disability.

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