The Right STD Benefit Start Date for Your Company
So just how soon after an injury or illness should the STD benefit start date be?
Many, maybe most, plans have their STD benefit start date the traditional 1/8/13 — it pays first day accident benefits (that’s the “1” in the formula), eighth day illness benefits (the “8”), and pays benefits for
- twelve weeks for an illness, which, when added to the one week waiting period make a total of thirteen weeks (the “13”)
- Thirteen weeks for an accident (also the “13”)
But You Don’t HAVE To Be Traditional
Well, if you have a sick-pay plan that annually allows five to ten sick days at full pay, you don’t need such a quick start.
Having both accident and sickness benefits start after a week will reduce plan cost by about 10%, and waiting two weeks will reduce the cost by as much as 25-30 percent. If that meshes with your sick pay plan, take advantage of the savings.
In fact, you can go as far out as 30 days before benefits start. That will give you a substantial reduction in benefit cost, but the trade-off is less security for the employees.
Never Forget Maternity Benefits!!
There’s another consideration. Maternity is considered a covered illness in most states. Moreover, maternity is perhaps the single most common reason people want to have a short-term disability plan.
And here’s a little-known fact: The maternity benefit period is pretty much standarized with most carriers. Six weeks for normal delivery and eight weeks for caesarian section, and the waiting period is considered part of the benefit period.
Think about that. If you have a one-week wait for benefits (maternity is always an illness – even when the pregnancy is accidental), your employee will only collect five or seven weeks of benefit.
Increasing the waiting period to two weeks reduces the benefit period to four or six weeks. And a four week elimination period results in a commensurate reduction in maternity benefit.
Plug that into your calculations. If your census includes a significant portion of child-bearing age females, you’d best allow for that in your plan design.
Your broker should be advising you on the best options – if he’s not, contact us.