Oftentimes, people do not like discussing healthcare coverage until they need it. However, it is critical that covered individuals understand their health benefits long before they need to use them. One employee benefit that may be offered but not well promoted is short-term disability. Here are some frequently asked questions to help employers understand the benefits of offering short-term disability, as well as explaining it to their employees.
What is it?
Short-term disability is compensatory coverage for an employee who sustains a non-job-related injury or illness that prevents him or her from working for a limited period of time. Short-term disability is not the same as workers’ compensation or Family Medical Leave Act (FMLA) benefits.
Workers’ compensation is the coverage for job-related injuries and illnesses. FMLA is a federally regulated benefit that requires criteria and provides protections that differ from short-term disability, such as:
- The employer must be FMLA covered (defined as an employer who employs 50 or more employees within a 75-mile radius of business).
- An employee is employed for at least 12 months by his or her employer and have worked at least 1,250 hours during the 12 months prior to leave.
- FMLA provides employee job and health benefits protections, unlike short-term disability.
- Unlike short-term disability, FMLA leave is unpaid.
Short-term disability plan definitions may differ. For example, Aflac defines “sickness” as “an illness, disease, infection, or any other abnormal physical condition, independent of injury, that is manifested and treated more than 30 days after the effective date of coverage and while coverage is in force” and “injury” as “a bodily injury caused directly by an accident, independent of sickness, disease, bodily infirmity, or any other cause, occurring on or after the effective date of coverage and while coverage is in force.” It is critical that employers understand what types of sicknesses, injuries, and other circumstances their short-term disability benefits cover and ensure their employees understand their benefits.
What does it cover?
Short-term disability coverage can range in type, level, and length of circumstances. For example, short-term disability does not cover pre-existing conditions, care for sick family members, or adoption. The length of short-term disability can range from a couple of weeks to 24 months.
Unlike FMLA, short-term disability does not protect job and health benefits. For example, an employee may be terminated while on leave and are not required to be offered the same position upon return. However, the American with Disabilities Act (ADA) offers protection to ADA-covered employers (those who employ 15 or more employees) from terminating an employee due to illness.
How is it regulated?
Short-term disability is typically provided through a private plan, but employers are not necessarily required to offer it. Only five states – California, Hawaii, New Jersey, New York, and Rhode Island – require employers to offer short-term disability benefits to their employees.
There are two ways an employer may provide short-term disability (1) self-funded or administered, meaning the employer provides and funds it, or (2) through an insurance provider who provides the benefit. Independent short-term disability plans are available for employees whose employer does not offer it, but they’re typically expensive.
If an employer implements the latter option, benefit payments will typically be administered through the insurance provider. This can cause separate pay schedules than the company’s payroll calendar.
Why should employers invest in short-term disability benefits?
Employers should invest in short-term disability for a couple of reasons:
- Given the impact COVID has already had on employers and employees alike, preparing for worst-case scenarios may work in the best interest of both parties.
- It can expand your marketability in your recruitment process.
- Short-term disability benefits qualify for a federal tax deduction.
If you’re interested in learning more about short-term disability benefits or would like to leverage a PEO’s competitive market, please contact Harbor America. Our employee benefits specialists can tailor a customized benefits package based on your employees’ needs.