Many, if not most, employees are familiar with their employer’s retirement plans and health insurance plans. Employees are customarily introduced to those plans and allowed to participate early in the employment relationship. Fewer are as knowledgeable about the short and long-term disability plans also offered by those same employers. These usually employer-provided insurance plans provide a limited amount of tax-free income at a time when a worker is more or less disabled for a longer or shorter period. In 1974, Congress enacted the Employee Retirement Income Security Act (ERISA). Not only about retirement, but ERISA also imposed minimum requirements on all employee benefit plans, including employer-provided long and short-term disability insurance. If your employer’s plan is subject to ERISA, you will receive a brochure outlining the plan. ERISA will also impose standards relating to claims processing and individuals’ rights under the plan. Generally, only employer-sponsored disability plans are subject to ERISA. Our law firm achieves results for our clients during their insurance claims. This includes obtaining $1,300,000 for an ERISA trial verdict, a $500,000 settlement for a disabled school teacher, and many more. Because ERISA is a federal law, if it governs your group disability policy, we can represent you no matter where you live. Call us today for a Free Denial Review, and read on for more information about what your claim may entail and to see how we can help you.
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Types of Disability Coverage
Disability isn’t something that only happens to someone else. The Council for Disability Awareness says one in four of today’s 20-year-olds will likely have a disability at some point before they retire. Disability insurance helps prepare you to deal with that eventuality.
Various types of disability insurance may cover you, including, for example, mortgage disability insurance, but the two main employer-provided types are short-term disability and long-term disability. The primary differences between the two are the length of the benefit payment period and the relative cost.
The tax status of your benefits depends primarily on whether you paid your premiums with pre or post-tax dollars. Your Human Resources department should be able to explain the tax status of your employer’s disability plans.
#1. Short-Term Disability Insurance
Short-term disability insurance (STD) pays a percentage of an employee’s salary for a specific period when they have an injury or illness and cannot perform their job. Usually, the benefit represents 40 to 60 percent of the employee’s gross base salary or wage and pays out for somewhere between two and twelve months of benefits. Independently purchased STD is also available and works much the same way. It is, however, far more expensive. With short-term disability, coverage usually begins somewhere between one day and two weeks after the condition causing the disability begins. Benefits will likely be paid in a range from nine to 52 weeks after that initial date. Many plans require an employee to use sick days or other paid time off (PTO) before the start of benefit payments. The employer can pay for short-term disability coverage or the employee can purchase it as a cafeteria benefit. Employer-paid plans can be purchased by an insurance company or self-funded by the employer. There can be tax implications based on who makes the payment. Some states make providing STD mandatory and mandate the coverage amounts and benefits. Be aware that other coverage, such as Workers Compensation, may apply depending on where and how you became disabled. In the meantime, as your disability payments near the one-year mark, it’s time to start thinking about long-term or permanent disability coverage.#2. Long-Term Disability Insurance
Long-term disability (LTD) insurance is an often employer-provided policy that protects employees from the loss of income resulting from the employee’s inability to work for an extended period due to injury, accident, or illness. LTD does not cover a disability due to work-related injuries that Worker’s Compensation disability coverage would cover. One of the more significant problems with long-term disability insurance is that less than half of employees in the American private industry have any disability coverage, and only one-third have access to long-term coverage. Most companies that offer plans pay for the basic long-term coverage, although employees may purchase additional coverage. If not, additional coverage is available in the marketplace—though generally at a much higher cost. Other groups, such as professional associations, may make lower-cost coverage available to their members. As a general rule, if the employer purchases the plan, the benefits are taxable, whereas if the employee pays, they will not be. Long-term disability benefits usually kick in when short-term benefits end. LTD plans often have a defined period for payments, typically in the range of two to ten years. Others may pay until retirement age (65); obviously, this is the preferable plan. Each LTD policy excludes different conditions and sets definitions for disability and eligibility for benefits. Some may exclude certain pre-existing conditions. Own-work and any-work policies offer different benefits. The former pays if the employee cannot do the employee’s regular job duties. The any-work policies pay only if the employees can perform no work duties at all.#3. Social Security Disability Insurance
Social Security Disability Insurance (SSDI) is a program administered by the Social Security Administration (SSA) that assists disabled people. Those with sufficient Social Security quarters, as defined for SSDI, may qualify for benefits. Those who don’t meet that standard may be eligible for Supplemental Security Income (SSI) for those with limited income or resources. SSDI is not governed by ERISA because it is a government plan and not an employer-sponsored plan. It is cumbersome to apply for and notoriously difficult to receive. More than half of all first-time applications receive a denial.#4. Worker’s Compensation Disability
Under the Louisiana Workers’ Compensation Act, you can collect permanent disability benefits under certain conditions. You can receive benefits for Permanent Partial Disability or Permanent Full Disability. Partial Permanent Disability under workers’ compensation is available when the job injury:- Leaves the worker without the use of a body part
- Leaves the worker with serious scarring or disfigurement
- Requires an amputation
- Unsuccessful rehab
- Physical incapacity due to permanent effects of injuries
- Opinion of vocational rehab counsel that worker is unemployable and will always be
- Factors such as
- Age
- Lack of education
- Low intellectual skills
- Work experience only as a laborer
- Severe functional restrictions such as requiring frequent rest periods
- Lack of transferable skills
- Required use of narcotics
- Permanent nature of the symptoms
#5. Accidental Death & Dismemberment Insurance
Accidental death & dismemberment insurance (AD&D) pays a lump sum benefit to policyholders and their dependents when the policyholder dies from an accident or loses hearing, vision, or limbs in an accident. AD&D policies only cover accidental death but may provide for double indemnity—paying double the face value of the policy - under certain circumstances. These policies are usually supplemental to life insurance and are relatively low-cost compared to other insurance policies.Cases We Handle
At J. Price McNamara ERISA Insurance Claim Attorney, we have had some remarkable success with ERISA and Disability Cases. Remember, in any of these cases, you may appeal a denial—but you need an experienced ERISA disability attorney to handle your appeal.
ERISA AD&D Insurance Denial Lawsuit - Husband, sole breadwinner, took out expensive AD&D policy through CIGNA. ERISA covered the plan, which provided the framework for the appeal of CIGNA’s initial denial, based on their claim that the husband had been driving impaired during the accident at issue. The surviving spouse worked with Price McNamara to appeal the denial and filed an ERISA denial lawsuit against CIGNA.
This litigation revealed evidence that CIGNA knew the driver was not impaired and that CIGNA had, in fact, repeatedly withheld that evidence from the claimants. The initial appeal went again in CIGNA’s favor, but Price McNamara appealed to the Fifth Circuit, which held that CIGNA had abused its discretion in denying the claim. The Fifth Circuit remanded the case with instructions to find for the surviving spouse who received $1.3 million.
Workplace Injury Disability Settlement—An oil rig worker lost the ability to continue his regular line of work due to an injury on a rig. We filed suit in the federal court in New Orleans, eventually settling for $1.3 million.
We handle claims with all types of disability insurers, including:
- Ameritas
- Assurity
- Fidelity Security
- Guardian/Berkshire
- Illinois Mutual
- MassMutual
- MetLife
- Mutual of Omaha
- Northwestern Mutual
- Ohio National
- Peterson International
- Principal Financial Group
- RiverSource
- State Farm
- The Standard
- Thrivent
- Unum
FAQs - ERISA and Disability
Q. What subjects a plan to ERISA rules?
- ERISA imposes administrative and legal obligations on all employers with employee benefits plans. Employee benefit plans under ERISA are called employee welfare plans and may include and plan the employer offers to provide:
- Medical, surgical, or hospital care
- Benefits for sickness, accident, disability, or death
- Unemployment benefits
- Vacation benefits
- Apprenticeship and training programs
- Daycare centers
- Scholarships
- Prepaid legal services
- PTO, holiday or severance pay
- Retirement plans like 401(k)s
Q. What are the main elements of ERISA compliance?
- ERISA compliance comprises three main elements:
- Reporting - The employer must file certain information with the Department of Labor and the IRS, including a summary plan description setting out the plan’s details. Plans must also report material modifications to the plan.
- Disclosure - ERISA requires sharing all material information with plan participants and the Department of Labor on request.
- Paying Claims - Plans must establish a claims procedure to process claims for benefits. The plan must provide information for appealing to any participant whose claim is denied.
Q. What is the difference between SSDI and SSI?
- SSDI or Social Security Disability Insurance is provided to disabled individuals who have worked enough quarters to qualify for Social Security Programs, as modified for the claimant’s age. Supplement Security Insurance is available for those who do not qualify for Social Security benefits and have very limited income and assets. States set the qualifying rules for SSI, and most also contribute to the benefits paid.
Q. What happens to employee benefits if the military calls a reservist to active duty?
- The benefits for the reservist and his/her family will continue for 30 days, at which point military benefits will apply. If the reservist’s spouse has potential coverage, the family may apply without regard to other standard enrollment periods. The reservist can also use COBRA benefits (at 102 percent of the cost to the employer) until you end your active duty.
Q. Are annual bonuses and long-term incentive plans covered by ERISA?
- ERISA does not apply to bonuses until that payment is systematically deferred to the termination of employment or beyond to provide retirement income. On the other hand, if employees must defer a significant portion of the bonus until retirement age or termination of employment, ERISA may well govern the plan.
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