Short Term Disability Product Overview

What is Short Term Disability?

• Provides weekly income protection in the event of a disability from a covered injury, sickness, or pregnancy

  • Must be unable to perform essential job duties

  • Must have earnings loss (typically < 80% of pre-disability earnings)

  • Benefits start after a short waiting period (e.g., 8th day)

  • Duration: Benefits typically last 12, 13, 25, or 26 weeks

  • Benefit start and duration commonly expressed as X/X/XX

  • Reduced by other income

  • Availability: Fully Insured or Administrative Services Only (ASO)

  • Funding: Employer and/or Employee Paid

  • *STD typically covers non-occupational disabilities

60% of weekly earnings is a common benefit percentage.

Who can be covered?

Employees who work for the employer on a regular basis in the usual course of the employer’s business.

• Employees in eligible class

• U.S. Citizen or legal resident of the U.S., it’s territories/protectorates

• May include international employees

Common minimum hour options:

• Full-time: 40 hours

• Part-time: 30 hours

Eligibility & Class Descriptions:

Class descriptions define which employees are covered with differences based on conditions of employment. They should be clear, objective, and mutually exclusive and never be written to include or exclude based on race, religion, gender, age, marital status or ethnic heritage.

Eligibility Waiting Period for Coverage

• Period of time that an individual must work before becoming eligible for coverage-determined by employer.

• Durations vary and can include 1^st of the month following or 1^st of the month coinciding with or next following the duration.

• Period of time worked under a prior policy reduces the duration-also known as Rolling Waiting Period.

Benefit Commence

• Also known as an Elimination Period within the industry.

• Period of time that an individual must be disabled before benefit payments begin.

• Usually ranges from 1 to 30 days after disability begins, with the most common periods being 1, 8, or 15 days.

Contract Language

Eligibility Waiting Period for Coverage:

1. None - if You are working for the Employer on the Policy Effective Date; or

2. 60 day(s)- if You start working for the Employer after the Policy Effective Date.

The time period(s) referenced above are continuous

The time period(s) referenced above are continuous. Eligibility Waiting Period for Coverage will be reduced by the period of time You were a Full-time Active Employee with the Employer under the Prior Policy.

Benefits Commence:

1. for Disability caused by Injury: on the 8th day of Total Disability or Disabled and Working

2. for Disability caused by Sickness; on the 8th day of Total Disability or Disabled and Working

Deferred Effective Date (Can Coverage Be Deferred?)

• If an employee is absent from work due to injury, sickness, mental health condition, substance use disorder, or pregnancy on the day coverage is to start, the employee’s coverage or increase in coverage will not become effective until the employee has been actively at work for one full workday.

• A scheduled absence (for example, vacation), will not defer the employee’s effective date of coverage.

First Day Hospital

What it is:

• •Benefits start on Day 1 of hospital confinement
  (≥ 24 hrs)

Why it matters:

• Ensures timely support for serious conditions

• Prevents potential abuse

Enhanced Option:

• Includes outpatient surgery with ≥ 24 hrs disability

First Day Hospital Benefit: How it Works

Optional First Day Hospital Benefit: A Benefit that includes first day outpatient surgery is also available to keep pace with today’s changing medical environment.

When Do Benefits Commence?

• Hospital confinement   ≥   24 hrs      OR      Outpatient Surgery   →   Disability period   ≥   24 hrs

to…

1. First day of hospital confinement orl

2. Date of the Outpatient Surgical Procedure

Benefit Amount Options

% of Pre-disability Earnings:

• Pays a percentage of weekly earnings up to a maximum dollar amount.

Incremental Plan:

• Employees elect benefits in $100 increments up to allowed maximums. Available through DisabilityFLEX.

Flat Benefit:

• Fixed weekly amount
  (commonly $100, $200, or $300).

Core/ Buy Up

Upgraded Coverage:

• Core / Buy Up plans provide better coverage for the Buy Up than the Core.

Common Setup:

• Employer pays for a lower Core benefit (e.g., 50%). Employees can Buy Up to a higher benefit (e.g., 60%) by paying premium for the extra coverage.

Additional Enhancements:

• Buy Up may include better benefit commence, higher maximum benefit, or longer duration.

DisabilityFLEX (DisFLEX)

100% Employee Paid

• DisabilityFLEX is a Hartford STD plan that is all employee-funded coverage.

Flexible Choices

• Coverage amount (incremental)

• When benefits start

• How long benefits last

• Tailored to meet individual needs

Employer-Defined Options

• Employer sets available choices. Common setup:

  • 2 benefit commencement options

  • 2 duration options

Pre-disability Earnings (Used to calculate benefits and earnings tests)

Standard definition:

____ means your regular weekly rate of pay, not counting bonuses, commissions, tips and tokens, overtime pay or any other fringe benefits or extra compensation in effect on the date You were Actively at Work before You became Disabled.

However, if You were an hourly paid Active Employee before You became Disabled, Pre-disability Earnings means the product of:

1. the average number of hours You worked per week, not including overtime, over the most recent 12 month period immediately prior to the last day You were Actively at Work before You became Disabled, multiplied by:

2. You hourly wage in effect immediately prior to the last day You were Actively at Work before You became Disabled.

Standard Options:

• Commissions, bonuses, and tips and tokens can be included within the standard definition.

• In lieu of the standard definition, another option is a W-2 definition for the earnings during the one full tax year prior to an employees last day worked.

Voluntary STD

• ✅ Offsets other income benefits

• Does not exclude employees in Statutory/PFML states

• Goal: Prevent overinsurance

DisabilityFLEX

• ❌ No offsets

• Excludes employees in Statutory/PFML states (except NY)

• Goal: Prevent overinsurance

Total Disability/ Totally Disabled

1. Injury

2. Sickness

3. Mental illness

4. Substance Abuse

5. Pregnancy

• Employee cannot perform essential duties.

• Work earnings are 20% or less of pre-disability earnings.

Disabled and Working

1. Injury

2. Sickness

3. Mental illness

4. Substance Abuse

5. Pregnancy

• Employee can perform some essential duties, but not all.

• Works part-time or limited duty.

• Work earnings are 21% - 79% of pre-disability earnings

Definitions of Disability- During & After Benefits Commence

Employer Plan Design Options…

• Total Disability Only: Must be totally disabled throughout and beyond the benefits commence period to be eligible for benefits.

• Disabled and Working With Benefit Commence Option (also known as residual): Can be disabled and working throughout and beyond the benefits commence period to be eligible for benefits.

• Disabled and Working Without Benefit Commence Option (also known as partial):  Must be totally disabled throughout the benefits commence period to be eligible for benefits and, once that is satisfied, can then be disabled and working to continue to receive benefits.

Recurrent Disability

Can benefits pick back up for a disability that occurs again?

• Recurrent claims do not require that a new benefits commence period be satisfied.

• The original maximum duration applies to recurrent claims.

• Timeframe determined by the employer.

___: What happens to my benefits if I return to work as an Active Employee and then become Disabled again?

When you return to work as an Active Employee is followed by a Disability, and such Disability is:

1. Due to the same cause; or

2. Due to a related cause; and

3. Within 15 consecutive calendar days of the return to work;

The Period of Disability prior to Your return to work and the recurrent Disability will be considered one Period of Disability, provided The Policy remains in force.

if You return to work as an Active Employee for 15 consecutive calendar days or more, any recurrence of a Disability will be treated as a new Disability.

Termination of Payment Provision (Used to determine when benefits will cease.)

When will my benefit payments end?:

Benefit payments will top on the earliest of:

1. the date You are no longer Disabled;

2. the date You fail to furnish Proof of Loss;

3. the date You are no longer under the Regular Care of a Physician;

4. the date You refuse Our request that You submit to an examination by a Physician or other qualified medical professional;

5. the date Your death

6. the date You refuse to receive recommended treatment that is generally acknowledged by Physicians to cure, correct or limit the disabling condition;

7. The last day benefits are payable according to the Maximum Duration of Benefits;

8. the date Your Current Weekly Earnings are equal to or greater than 80% of Your Pre-disability Earnings if You are receiving benefits for being Disabled from Your Occupation; or

9. the date no further benefits are payable under any provision in The Policy that limits benefit duration/

Benefits for disabled employees do not terminate if the group policy terminates or if the employer moves the coverage to another carrier.

What Types of Disability Does the STD Plan Cover?

Standard:

• Non-Occupational Coverage

  • Injuries/ sickness outside of work

Optional:

• 24-Hour Coverage

  • Covers both work and non-work incidents

Workers’ Compensation: Exclusion or Offset?

Understanding Coverage Interactions with Workers’ Compensation & STD Plans

• Workers’ Compensation covers work-related disabilities.

• In STD plans*, it can be:

• ⚠ Excluded - not covered, or

• ➖ Offset - reduces STD benefit

• *Always excluded with DisabilityFLEX .

Workers’ Compensation: Exclusions & Limitations

The Policy does not cover, and We will not pay a benefit for, any Disability:

1. unless You are under the Regular Care of a Physician;

2. that is caused or contributed to by war or act of war, whether declared or not;

3. caused by Your commission of or attempt to commit a felony;

4. caused or contributed to by Your being engaged in an illegal occupation; or

5. caused or contributed to by an intentionally self-inflicted Injury;

6. for which Workers' Compensation benefits are paid, or may be paid, if duly claimed;

7. .sustained because of doing any work for pay or profit for another employer, including self-employment.

Exclusions #6 and #7 are included when the plan does not cover work-related disabilities.

Other Income Benefits means the amount of any benefit for loss of income, provided to You or Your family, as a result of the period of Disability for which You are claiming benefits under The Policy. This includes any such benefits for which You or Your family are eligible or that are paid to You or Your family, or to a third party on Your behalf, pursuant to any:

1. temporary, permanent disability, or impairment benefits under a Workers' Compensation Law, the Jones Act, occupational disease law, similar law or substitutes or exchanges for such benefits;

2. governmental law or program that provides disability or unemployment benefits as a result of Your job with Your Employer;

3. .plan or arrangement of coverage, whether insured or not, which is received from Your Employer as a result of employment by or association with Your Employer or which is the result of membership in or association with any group, association, union or other organization;

4. mandatory "no fault" automobile insurance plan;

5. disability benefits under:

Other Income Benefits are offsets deducted from the benefit. State regulations may cause this list to vary.

Other Common Offsets (Reductions To The Benefits)

• Paid time off, vacation, sick pay, and salary continuation

• Statutory Benefits

• Paid Family and Medical Leave (PFML) Benefits

• Mandatory No Fault Automobile Insurance Benefits

Minimum Weekly Benefit

Guarantees benefits even after offsets.

• Common Minimums

  • Flat $25

  • Greater of 10% of weekly benefit or $25

• Not Applicable

  • DisabilityFLEX (no offsets)

How Partial Week Benefits Are Calculated

• 1/7th Calculation

  • Formula: Weekly benefit ÷ 7 × days disabled

• 1/5th Calculation

  • Formula: Weekly benefit ÷ 5 × days disabled

Employers choose one of the methods.

Sample STD Benefit Calculations

Benefit Calculation - % of Pre-disability Earnings: Employee Not Working

Assumptions

Benefit Percentage: 60%

Maximum Benefit = $500

Minimum Benefit = $25

Example 1 – Pre-disability Earnings $700

$700 x 60% = $420 weekly benefit

Employee receives $420 weekly benefit

Example 2 – Pre-disability Earnings $900

$900 x 60% = $540 weekly benefit

Employee receives $500 per week (maximum)

Example 3 – Pre-disability Earnings $500, Offsets $295 (Paid Family and Medical Leave)

$500 x 60% = $300 - $295 = $5 weekly benefit

Employee receives $25 per week (minimum)

Sample STD Benefit Calculations

Benefit Calculation: Proportionate loss formula (this is the standard formula) for employee’s working in a limited duty capacity.

Proportionate Loss Formula:

Weekly Benefit = (A-B)/A x C

Where…

• A= Your Weekly Pre-disability Earnings.

• B= Your Current Weekly Earnings

• C= The Weekly Benefit payable if You were Totally Disabled

Assumptions

Benefit Percentage: 60%

Maximum Benefit = $500

Minimum Benefit = $25

Example 1 – Pre-disability Earnings $700, Current Weekly Earnings $400

$700 - $400   x  $420*   = $180

      $700

*$700 x 60% = $420 weekly benefit

Example 2 – Pre-disability earnings $700, Current Weekly Earnings $400, Statutory Offset $100

$700 - $400   x  $320* = $137

      $700

*$700 x 60% = $420 - $100 (Offset) = $320

Enrollment Key Rules

• Employees must enroll if they contribute toward the cost of coverage however employees are automatically enrolled by the employer for mandatory contributory coverage.

• Common enrollment opportunities: New hire, annual enrollment, or family status change

• Exception enrollment: At any time

Enrollment Methods & Rollover

• Enrollment methods: Paper, voice recording, or electronic.

• Election rollover: Most common is automatic rollover; some require re-election.

Change In Family Status

Occurs when…

• You get married or You execute a domestic partner affidavit

• You and Your spouse divorce or You terminate a domestic partnership

• Your child is born or You adopt or become the legal guardian of a child

• Your spouse or domestic partner dies

• Your child is no longer financially dependent on you, or dies

• Your spouse or domestic partner is no longer employed, which results in a loss of group insurance

• You have a change in classification from part-time to full-time or from full-time to part-time

Evidence Of Insurability (EOI)

Key Rules…

• EOI not required for new hires/newly eligible employees.

• Common: EOI required if enrolling or increasing coverage at a later date.

• Option: EOI not required for one level benefit increase (only applicable for plan designs with more than one benefit option)

• Exception: EOI never required

• EOI rules can differ for annual enrollment before vs. after case effective date.

Employee enrollment —new hire/ newly Eligible—> EOI Not Required.

Employee enrollment —Later enrollment or increase in coverage—> EOI Typically Required

Pre-existing Condition Limitation (Pre X)

When It Applies

• ✔ Employee-paid coverage

• ✖ Employer-paid coverage

How It Works

• Limited benefits (e.g., 4 payments)

• Possible exclusion

Key Periods

• Continuously Insured

• Look Back

• Treatment-Free (optional)

:  Are benefits limited for Pre-existing Conditions?
We will only pay benefits, or an increase in benefits, under The Policy for any Disability that results from, or is caused or contributed to by, a Pre-existing Condition for up to 4 week(s), unless, at the time You become Disabled:

1. You have not received Medical Care for the condition for 90 consecutive day(s) while insured under The Policy; or

2. You have been continuously insured under The Policy for 365 consecutive day(s).

__ means:

1. any Injury, Sickness, Mental Illness, pregnancy, or episode of Substance Abuse; or

2. any manifestations, symptoms, findings, or aggravations related to or resulting from such Injury, Sickness, Mental Illness, pregnancy, or Substance Abuse;

for which You received Medical Care during the 90 consecutive day(s) period that ends the day before:

1. Your effective date of coverage; or

2. the effective date of a Change in Coverage.

Five parts of Pre-existing Condition Limitation

1. Coverage Effective Date

• This is the starting point for determining eligibility.

2. Continuously Insured Period

• If the disability occurs within this period, investigate for Pre X.

• If outside this period → Pre X does not apply.

3. Look Back Period

• Check if the employee received medical care for the condition during the XX consecutive days before the coverage effective date (or change in coverage).

• If yes → Pre X may apply. 

4. Treatment Free Period (if included)

• If the employee doesn’t go a specified number of consecutive days without treatment while insured, Pre X may apply.

5. Limitation

• If Pre X applies, benefits are limited (commonly up to 4 weeks).

Transitioning to Long Term Disability (LTD)

When STD and LTD are purchased together, it’s important to structure the plan design for the end of the STD and the beginning of the LTD so that there is a smooth transition without a gap in coverage.

This is commonly known as dovetailing

For a good employee experience, coordinate other plan design provisions between STD and LTD particularly eligibility, earnings definitions, disability definitions, benefit percentages, and maximums.