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Long-Term Disability

 

 

 

 

 

The Long-Term Disability Insurance is mandatory, and is paid for by the University. The University-paid Long-Term Disability Insurance benefits are incremental; there is a five-year period before the plan reaches the full benefit level. The Wrap-Around Long-Term Disability Insurance is a voluntary supplemental insurance used to supplement the University-paid Long-Term Disability Insurance during the period which that plan is not at full benefit level.

Long-Term Disability Insurance

This insurance is provided by the University at no cost. The University pays the premium for Merit Staff, and the premium cost is added into the Flexible Credits for Faculty, Professional and Scientific, and Merit Supervisory Exempt Staff.

Coverage

Your disability insurance benefits are based on salary, length of service, and the plan chosen. Faculty, Professional & Scientific, and Merit Supervisory Exempt Staff may select between a 50% pay replacement plan and a 70% pay replacement plan. Merit staff are automatically provided with the higher-coverage 70% plan. All of the benefit provisions of these plans are identical except for the percentage of pay replacement. If eligible, coverage is mandatory. The plans work as follows:

Year of Employment in Which Disability Commences	Coverage of 50% Plan (Available to Faculty, Professional & Scientific, or Merit Supervisory Exempt staff only)	Coverage of 70% Plan
Less than 1 year	0%	0%
1 year but less than 2 years	10%	30%
2 years but less than 3 years	20%	40%
3 years but less than 4 years	30%	50%
4 years but less than 5 years	40%	60%
5 years and over	50%	70%

If you are Faculty, Professional & Scientific, or Merit Supervisory Exempt staff and you select 50% coverage and later wish to enroll in 70% coverage, you must complete a medical questionnaire, which must be approved by the insurance company before the increased coverage will begin. In addition, a physical, urine test, and/or blood test may be required.

Wrap-Around Long-Term Disability Insurance

The Wrap-Around Long-Term Disability Insurance is a plan that you can purchase to supplement the 70% Long Term Disability Insurance plan during the five-year period of time it is not at full benefit level. The two plans work together to ensure that the benefit you will receive if you become disabled will always equal 70% of your salary. The wrap-around plan cannot be purchased with the 50% Long-Term Disability Plan.

Coverage

The wrap-around coverage supplements the coverage of the 70% LTD policy to bring the benefit level up to 70% of salary during the first five years of employment. The cost for this insurance declines annually as the 70% LTD insurance plan coverage increases. The plans work together as follows:

Year of Employment in Which Disability Commences	Coverage of University-paid 70% LTD Plan	Coverage of Optional 70% Wrap-around Plan
Less than 1 year	0%	70%
1 year but less than 2 years	30%	40%
2 years but less than 3 years	40%	30%
3 years but less than 4 years	50%	20%
4 years but less than 5 years	60%	10%
5 years and over	70%	0%

Participation in this program requires completion of a medical questionnaire, which must be approved by the insurance company before coverage will go into effect. In addition, a physical, urine test, and/or blood test may be required.

Cost

The cost is $1.73 per hundred of benefit per year; maximum covered salary is $500,000.

Paying Your Premiums Before-Tax vs. After-Tax

Faculty, Professional & Scientific, and Merit Supervisory exempt staff have a choice of paying their monthly premiums under any of the disability plans on a before or after-tax basis. Merit staff can pay their monthly premiums for the Supplemental Wrap-Around LTD Insurance on a before or after-tax basis. There are advantages and disadvantages for each choice.

With the pre-tax option, the premiums are paid with pretax money or flexible credits if you have them. The premiums will not be subject to Federal, State and Social Security taxes. This could result in a significant tax savings, which could save you anywhere from 30% to 50% of your premium cost. If you would become disabled and start collecting a benefit under this program, the monthly payment you receive will be taxed as ordinary income.

If you elect to pay your premiums on an after-tax basis, the premiums will be deducted from your salary. If you are Faculty, Professional and Scientific, or Merit Supervisory Exempt staff, premiums will NOT be deducted from flexible credits. The premiums will be subject to Federal, State and Social Security taxes. However, if you become disabled and start collecting a benefit, the monthly payment you receive would not be taxed, providing you have been paying your monthly premiums on an after-tax basis since the beginning of the calendar year prior to becoming disabled.

The selection of the before-tax payment option is the default and is the most popular, since for the majority of staff, the chance of becoming disabled while employed is slim. If you feel your odds of going on disability are higher, because of a medical condition or high-risk occupation or hobby, you might want to consider the after-tax option.