Employee Benefits | FJG/FYI Articles
Considering Supplemental Individual Income Protection Plans
Looking to change your benefit plan design
to both keep your costs down and recruit/
retain employees? You may wish to consider
this possibility: Instead of changing your
Group Long-Term Disability (LTD) plan
to accommodate highly-compensated key
employees, consider working with your
agent to add a Supplemental Individual
Income Protection (SIIP) plan for all
employees.
Why? As these plans are available on a Guarantee Issue basis, most employees can participate--and you can segment your population so you’re only paying for the employees that you want to. The remainder of your employee population may purchase this on a voluntary basis.
Want to see how this works? A semiconductor manufacturer had a Group LTD plan covering 60% of earnings (defined as salary only) to a maximum benefit cap of $7,500 per month. At this level of income protection, it was determined that the plan was not adequate because there were 15 executives making more than $150,000 in salary--and most of the employees were also awarded some kind of bonus incentive throughout the year. The simple solution was to raise the benefit cap to $10,000 per month and “redefine” earnings to include bonuses. The increase in Group LTD premium was reasonable, but the employer was looking for an alternative, as the medical coverage was also being modified at the same time.
This company’s agent suggested that the employer keep the Group LTD plan design as-is, and install a SIIP plan that would cover the exposed income of all employees. A further recommendation was for the employer to cover the cost for the 15 executives (which was approximately the same outlay as if they were to pay for the change in the Group LTD redesign), and allow other employees to pick up their own policies on a voluntary basis. This was also considered to be an attractive design because employees were interested in protecting income through an individual policy that they would own--without going through rigorous medical testing.