Often, as a part of an employee benefits package, an employer may provide long-term disability insurance. That employer-sponsored plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA), which is a federal statute.
Typically, if the insurance carrier approves the claim for disability, these plans pay a monthly disability benefit of between 50% and 66% of your income, MINUS other disability benefits you may be entitled to such as Social Security Disability, Workers’ Compensation, and No-Fault, etc. At first glance, while an employer-sponsored long-term disability plan seems to cover you in the event of a disabling injury or illness, often they have specific restrictions and/or limitations.
For example, the monthly benefit you will receive through an ERISA plan is based solely on your base salary/income. Therefore, if you are a salesperson and you rely on commissions to make a living, you need to understand that your disability benefits ARE NOT based upon your total pay that includes these commissions. Rather, your disability benefit is a percentage of only your base pay. The same applies for other occupations such as hairstylists and restaurant employees who may rely on tips. Tips are NOT considered your base pay.
In addition, many of these disability plans define your disability eligibility as Own Occupation for the first two years. Own Occupation means that you cannot work in your own job or in a job with similar responsibilities, and is a simpler threshold to over come. However, after two years, the requirement becomes Any Occupation, meaning, you cannot work in any job, at all. And that is when it may become much more complicated. For instance, while you may not be able to do your job as a plant manager, where you may move around a lot throughout the course of the day, you may be able to do a job that requires little or no moving around, a sedentary position. The change from Own Occupation to Any Occupation is where most people will experience difficulties with the insurance carrier.
It is prudent to get to know your employer-sponsored long-term disability plan (ERISA) so you know what to expect in the event you become disabled. Call us for a case evaluation. 631-582-1200