STD and LTD Plan Structure
| Feature | Short-Term Disability | Long-Term Disability |
|---|---|---|
| Benefit amount | 60–70% of pre-disability income | 60% of pre-disability income |
| Elimination period | 0–14 days | 90–180 days (after STD ends) |
| Benefit period | 13–26 weeks | To age 65 or Social Security normal retirement age |
| Definition of disability | Own occupation (typically) | Own occupation for 2 years; any occupation thereafter |
| Maximum benefit | $1,500–$3,000/week | $10,000–$15,000/month |
Tax Treatment of Disability Benefits
The tax treatment of disability benefits depends on who pays the premium. If the employer pays the premium, disability benefits are taxable to the employee. If the employee pays the premium with after-tax dollars, disability benefits are tax-free. Many employers allow employees to pay the STD premium through payroll to make benefits tax-free.
Disability Risk Communication
IQ Insight
Employees significantly underestimate their disability risk. The Social Security Administration estimates that 1 in 4 workers will become disabled before retirement. Yet most employees believe disability is something that happens to other people. Effective disability communication uses real statistics and relatable scenarios to help employees understand their risk — and the financial consequences of being uninsured.