Do I need to provide evidence of insurability to enroll in Long-Term Disability (LTD)?
You do not have to provide evidence of insurability (good health) to enroll, but you must be actively at work on the day your coverage is scheduled to go into effect or coverage will be delayed. If you are not actively at work, coverage will become effective on the first subsequent day you report to work. When you enroll, you must indicate whether you are, or are not, a tobacco user. You will have the opportunity to enroll without evidence of insurability during each Annual Enrollment period. However, pre-existing condition limitations will apply.
What are the pre-existing condition limitations for LTD coverage?
A pre-existing condition is one for which you had symptoms, received medical treatment, consultation, care or services, or took prescribed drugs or medicines during the three months before your LTD coverage began. You cannot receive LTD benefits for a pre-existing condition if your period of disability begins during your first 12 months of plan coverage.
If I become disabled, will my LTD benefit be taxed?
If you are paying the full premium, your benefit will not be taxed. However, if you have waived health coverage and are using part of the employer contribution to pay your LTD premiums, your LTD benefits will be taxed. That’s because the premiums are paid with after-tax dollars if you pay them and non-taxed dollars if the state pays them. The IRS looks at coverage paid for by the state as deferred income that is subject to taxation when received.
Why is our LTD benefit offset by other retirement or disability benefits we receive?
The purpose of LTD coverage is to ensure you have a source of income in case you are unable to work due to a disability. However, the plan also wants to encourage you to return to productive employment as soon as possible. By guaranteeing a percentage of your pay, the plan ensures you will have a certain level of income, although it may come from various sources. While 65% of pay may not sound like enough to live on, keep in mind that you do not pay Social Security or federal income tax (in most cases) on your LTD benefits and on some other potential disability benefits. Also, you will not have many work-related expenses, such as commuting costs, while you are not working, so you may not need as much income. If the plan were to always pay 65% regardless of other benefits, the premiums would be much higher. Also, some disabled employees might receive more than 100% of their pay from various sources, providing little incentive for them to return to work. This would further increase plan costs and premiums.
What kinds of other benefits offset my LTD benefit?
The benefits that offset the LTD benefit include those under individual and family Social Security, any group LTD plan (including those through professional associations), A&M System leave programs, Railroad Retirement Act, Jones Act, workers’ compensation, occupational disease law, compulsory benefit act or law, and similar plans or laws. Your LTD benefit will not be offset by any disability or retirement benefits from an employer-sponsored retirement plan, including TRS and ORP, unless you actually receive those benefits.
Why is the Long-Term Disability benefit period for mental-health-related disabilities limited to 24 months?
The 24-month limit applies only to non-organic mental-health-related disabilities. Benefits for organic mental illnesses, such as schizophrenia, bipolar disorder and Alzheimer’s, are paid the same as for physical disabilities. The potential length of non-organic mental-health-related disability claims is difficult to determine, so large reserves must be kept to cover these disabilities. This causes LTD plan costs, and therefore premiums, to increase. For that reason, payment periods for non-organic mental-health-related disabilities are limited by most employers. The 24-month limit is in line with the industry standard for LTD coverage and should help reduce our claims costs and keep premiums low for everyone.