Workplace Culture

Matter of Life or Death or Disability

By Cary Donham

Feb. 26, 2015

It can happen in a second: a car accident, an unexpected illness, or a fall on an icy sidewalk, and an employee is facing a long absence from work — well in excess of Family Medical Leave Act requirements.

Group life and disability insurance are benefits you can provide to your employees to assist in such unexpected circumstances. And they will enhance your employee recruitment and retention efforts. An employee who has life or disability insurance can be comforted by the fact that his or her family will be taken care of financially should the unimaginable occur. Here are some issues you should consider.

1. ERISA Governs Life and Disability Insurance Plans

The Employee Retirement Income Security Act of 1974, or ERISA, is a federal law that sets minimum standards for the majority of pension, health and disability benefits plans voluntarily established by private companies. ERISA imposes certain fiduciary duties on the administrators of the plan (those who administer and manage the plan and its assets), which can be either the company itself or a third-party service provider or administrator. You should make sure that plan administrators provide plan participants with timely information on the features and funding of the plan, administer the plan prudently and establish a grievance and appeals process for participants. ERISA also grants plan participants the right to sue for their benefits and for breaches of fiduciary duty by plan administrators.

2. Considerations for Life Insurance Plans

Life insurance benefit plans provide set amounts to a deceased plan participant’s beneficiaries if the participant died from a cause covered by the policy. Causes of death resulting from alcohol or drug use, criminal activity, war or terrorist actions, suicide, or aviation accidents are often excluded, so inform your employees as to what is covered and what is not. Also, remind your employees to keep the company updated on whom the worker’s beneficiaries are to avoid benefits going to an unintended beneficiary.

3. Considerations for Disability Insurance Plans

Many companies offer short-term disability benefits. Short-term disability insurance pays plan participants a portion of their income after a short waiting period, but only for a limited time, for example, during maternity leave. Short-term plans are often self-funded, but also can be part of a group policy. On the other hand, long-term disability plans pay participants a portion of their income while they are disabled, after a waiting period of several weeks to several months, for a longer period of time. Make certain employees understand how the plan defines “disabled.”  Some plans require a participant to be unable to perform in any gainful occupation that is reasonably suited based on the participant’s education, work experience and other individualized factors.

Cary E. Donham is a partner and Richard Y. Hu is an associate attorney at Taft, Stettinius & Hollister in Chicago. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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