Short Term Disability Basics
A quick guide to short term disability employee benefits
In any industry, working can be risky to the health and well-being of adults. The AFL-CIO has recently released the findings of it's annual report on the safety of the American workplace. Called Death on the Job: The Toll of Neglect, the report advises that each day approximately 150 workers die on the job, and there are some 7.4 million to 11.1 million worker injuries per year, many of which go unreported.
According to the Council for Disability Awareness, around one-quarter of today's 20-year olds have a chance of becoming disabled at some point in their career before retirement. On average, a long term disability incident lasts 34.6 months - which is almost three years of lost work and income.
What happens when an employee is suddenly injured off the job or faces an unexpected catastrophic illness? They want to know they'll still have income to pay bills and cover living expenses while they recover. That’s when a short term disability program may be able to help.
What are Short-Term Disability Benefits?
Short term disability (STD) is a type of financial benefit that pays a percentage of an employee’s salary for a specified amount of time, if they are ill or injured, and cannot perform the duties of their job. Generally, the benefit pays around 40 to 60 percent of the employee's weekly gross income.
When Short-Term Disability Starts Covering the Employee
Coverage usually starts anywhere from one to 14 days after an employee suffers a condition that leaves them unable to work. The time of coverage may vary from 9 to 52 weeks from eligibility. Many times, employees are required to use sick days before short term disability kicks in if it’s an illness that keeps them out of work for an extended period of time.
For this reason, employers often have other types of insurance that cover workplace injuries vs. those that occur off the job. There may also be a different policy for short term disability for sicknesses and injuries.
If an employee must be out for longer than the short term disability benefit covers, then either a long term disability plan or permanent disability kicks in. This may happen at 10 to 53 weeks from the date of eligibility. Determination for long term disability is provided by the insurance company's team of doctors and insurance analysts who carefully monitor each case.
Who Pays for Short Term Disability Coverage?
A short term disability policy can be an employer or employee paid benefit. Generally, though, short term disability coverage is employer-paid. Companies do have a choice of having employees pay for coverage, with certain tax implications. It is also important to note that each state decides if employers must carry short term disability insurance and what coverage amounts need to be. States can also dictate how much the weekly cash benefit limits will be.
Group coverage for short term disability can be attained in the following ways:
- Contract agreement through an insurer that covers disability.
- Through a self-funded plan set aside by the employer directly.
Coverage Terms and Responsibilities
As an employer, you can create a policy dictating that employees use sick days before going on short term disability for an extended illness. You can also require documentation from a doctor to prove an illness or injury. During the time that an employee is missing work, the employer may also request that the employee visit an approved medical provider or an occupational medicine center for regular updates on the progress of the employee's health.
A third-party claims administrator will be in charge of managing these aspects while the employee is out of work. Employees are required to report any changes in their status immediately. These rules are in place to help prevent insurance fraud, a problem that costs employers billions of dollars annually.
Different short term disability plans dictate different terms for qualifications. The main terms are listed below:
- Employees need to work for the employer for a certain amount of time before coverage kicks in.
- Employees need to work full-time, usually 30 hours or more a week.
The following are part of what a short term disability plan benefits package may include:
- Percentage of weekly salary paid out (typically between 40% - 60% of weekly salary).
- Duration of short term disability benefits (typically between 9 to 52 weeks).
- Maximum amount of time covered under this disability program (up to 52 weeks)
It’s also important to know the rules of the states where employee reside. While short term disability is not a requirement in most places, The Society for Human Resource Management advises that five states including California, Hawaii, New Jersey, New York and Rhode Island and the US territory of Puerto Rico have mandatory coverage guidelines.
As an employer, you may want to have a long term disability program in place once an employee’s short term disability ends. This can be offered as a voluntary benefit option.
Article updated by Tess C. Taylor on 7/31/17