What is Short Term Disability Insurance?
Short Term Disability Insurance (STD) can help employees cover a portion of their income if they need to miss work due to injury or illness. This benefit can help to ease financial strain when employees can’t work due to accident, sickness, or pregnancy. Our short-term disability provider is Metlife.
There are two types of Short Term Disability Insurance you can offer your employees: Voluntary Short Term Disability Insurance and Noncontributory Short Term Disability Insurance. Please note, employees can only be enrolled in one policy therefore you can only offer either Voluntary STD or Noncontributory STD.
Benefit Coverage Options
- Voluntary Short Term Disability:
- 60% of pre-disability earnings, up to $1,000 per week
- Non-Contributory Short Term Disability:
- 60% of pre-disability earnings, up to $1,000 per week
- 60% of pre-disability earnings, up to $1,500 per week
How does voluntary STD differ from noncontributory STD?
Voluntary STD insurance is optional and paid for entirely by the employee. Premiums are deducted from the employee’s paychecks after tax; as a result, claims are tax-free.
Noncontributory STD is a company-paid benefit that is automatically extended to all employees who are eligible for benefits. Premiums are paid for directly by the company and employees do not pay taxes on these premiums. As a result, if an employee files a claim, the payout from the claim will be considered taxable income.
Company Enrollment
Short Term Disability Insurance coverage only begins on the 1st of the month. To offer STD Insurance to your employees, follow these steps:
First, to add the benefit, navigate to your company’s benefits center through HR > Benefits > Add Benefits. Find Short Term Disability Insurance and click “Set Up Now”.
Next, you will find detailed information about this benefit; including different options, costs, billing, and more. Once you’ve reviewed this information, click “Get Started”.
Select which Short Term Disability policy you would like to offer, the policy effective date, and click “Review”.
Finally, once you review your selections click “Submit” to complete the company enrollment.
Billing
All Short Term Disability plans are fixed-rate premiums, this means the amount will not change in regard to the age of the participant.
Voluntary Short Term Disability Insurance (employee paid): The cost is based on the employee’s current income. The monthly cost is determined by taking the weekly benefit and multiplying it by the policy rate per $10 of covered benefit.
Premiums are split between the employee’s first and second vouchers of the month (semi-monthly/ bi-weekly/weekly). Please note, if there are 3 biweekly paydays in a given month, deductions will occur on the 1st paycheck of the month and on the 1st paycheck after the 15th of the month.
Noncontributory Short Term Disability Insurance (employer paid): The cost is based on the employee’s current income. The monthly cost is determined by taking the weekly benefit and multiplying it by the policy rate per $10 of covered benefit.
Premiums are charged directly to the employer via a billing invoice on the 5th of every month (or the next business day if the 5th falls on a weekend or holiday). There are no additional fees associated.
Who is eligible for Short Term Disability Insurance?
Eligible members would be:
- Full-time employees
- Part-Time Employees (must be working 30+ hours and benefits-eligible)
- Paid owners are eligible for both Voluntary and Noncontributory policies.
- Unpaid owners are only eligible for noncontributory STD up to $1,000.*
- Premiums: Employers are automatically charged the maximum premium amount for an unpaid owner's policy
- Claim Payout: Unpaid owners will be given the maximum payout in cases of a claim
*Unpaid owners are not eligible for Voluntary STD because premiums are collected from member’s vouchers, and unpaid owners do not have a salary (and therefore no vouchers) to collect the premiums from.
How can my employees enroll?
Voluntary Short Term Disability: all eligible employees will receive an enrollment opportunity in Justworks at the time of hire or at the time they become eligible for this benefit. Employees will be notified the day after the enrollment period opens and then receive reminders to enroll.
Noncontributory Short Term Disability: all eligible employees will be auto-enrolled. Employees will be notified that benefits are active on the effective date.
When would the Short Term Disability insurance termination occur when the employee is separated?
The policy will terminate at the end of the employee's separation month.
Is Short Term Disability Insurance Coverage restricted in some states?
Currently, there are no state restrictions.
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.