April 2021

For this month's article, we’ll be looking at elimination periods and what to expect when a disability claim takes place. Not sure what elimination periods are? No problem – that’s what this article’s for. 

What is an elimination period?

An elimination period is the time period between when an illness/injury has occurred and the commencement/receipt of the benefit payment. An elimination period can range anywhere from 30 - 365 days depending on the policy. When it comes to a disability, elimination periods and premium has the inverse effect. Shorter elimination period means higher premium, Longer elimination period means a lower premium.

Long-term disability (LTD) can result in longer wait periods than short-term disability (STD), so it’s important to let employees know what the possible waiting period will be if they ever need to make a claim. Your benefits booklet will always highlight this information.

Are disability claims a taxable benefit?

This an extremely common question and is one that can seem daunting to consider. For the majority of benefits, taxation is straight forward but there are variations when it comes to disability.

The main difference is clear when we compare  employee-paid vs employer-paid premiums. In the case of disability premiums, if the employer pays even one cent of the disability premium it becomes a taxable benefit to the employee, should they begin receiving the benefit. When the employee pays 100% of the disability premium, the benefit is non-taxable to them upon commencement of the benefit. See our previous beyond benefits issue to learn more about benefit taxation. 

How do I explain the benefit of paying disability premiums to my employees?

It is not easy talking to employees about 100% employee-paid disability premium deductions from salary. We get it.

 The easy answer is taxes. As stated above, if the employee pays 100% of the disability premium, it is a non-taxable benefit for the employee when they receive the benefit. If an employee becomes disabled and unable to work, short-term and long-term disability insurance will protect them from complete loss of income.

As an employer, part of offering a benefits plan is to support your employee’s financial security. When it comes to STD/LTD, as an organization, you’re providing plan members with the ability to access an extremely valuable benefit(s) at a reduced price compared to individual insurance. This is due to the economies of scale awarded to group plans.

How does an employee submit a disability claim?

The same information is required for both long-term disability and short term disability.

The first step in applying for a short-term disability benefit is for the plan member to obtain a copy of the claim form either their HR department or their insurance carrier. This form will ask for basic employee information  (e.g. date last worked, a description of their medical condition, some personal information, and their contact details) and can be submitted directly to the insurance provider in order to protect their privacy.

Next, both the employer and the plan member’s physician will need to each complete their own claim forms on the employee’s behalf. The physician’s statement is a mandatory requirement for the insurance provider’s underwriter’s evaluation of the claim. The employer’s statement is to confirm that the employee is in fact eligible for the benefit and acknowledges that the process has begun.

All three of the forms are required to open the employee’s claim file and begin its evaluation.