Short Term Disability
Group Short Term Disability (STD) is an employer provided benefit that is designed to assist an employee in replacing income, on a short term basis, lost as a result of a disability. The method in which most insurance companies use to calculate the percentage of replaceable income usually falls in the range of 60% of gross weekly income. The goal being that the STD plan is designed to replace a portion of an employees lost income that is close to the employee's after-tax take home pay. The following are some provisions that make up the bulk of a Short Term Disability contract:
- Maximum Covered Salary - This is determined by the employer and the total volume of salary of the employees in the company.
- Elimination Period - This is the amount of time that must pass before a disabled employee becomes eligible for benefits. This can be anywhere from the 1st day of disability to the 30th day.
- Duration of Benefits - This represents how long benefits will be payable, i.e. 4 to 26 weeks.
- Own Occupation Protection - This feature ensures that if an employee is disabled, and cannot perform the material duties of his or her own occupation that they were trained for--they will still be considered totally disabled. This can be as short as 2 years or as long as standard retirement age (ADEA).
- Residual Disability - If an employee is disabled and then returns to work, and experiences an earnings loss of 20% or greater, the employee will still receive a benefit to offset this earnings loss.