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CEBS-GBA 2, Module 10 Exam (Disability Income Programs)
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CEBS-GBA 2, Module 10 Exam(Disability Income Programs)
Sick pay - -With the exception of a few jurisdictions that mandate
nonoccupational disability
insurance, employers have had no statutory responsibility to pay individuals
who
are sick or injured and missing work for reasons other than those that qualify
for
workers' compensation benefits. This regulatory landscape is slowly shifting
as states
and cities enact laws mandating paid sick leave.
-Salary continuation program - -A salary continuation program is an
informal program that allows employers to
manage short-term absences for pregnancies and non-work-related illnesses
or
injuries without contracting with an insurance carrier.
-Short-term disability (STD) - -Benefits under a short-term disability plan are
typically provided through a group
contract between an insurance company and an employer. Contracting with
an
insurance company to provide STD benefits has its advantages. It ensures
that
experienced professionals are managing claims, gives access to return-to-
work
support and fraud-prevention services, and locks in a fixed amount of
monthly
financial obligation (premiums) regardless of the disability benefits being
paid. Some
drawbacks of insurance contracts are less control in designing and
administering the
plan and exposure to additional costs from premium charges related to
taxes,
commissions and insurance profits. The tax charges are avoided when the
plan is a
self-funded plan. Typically, employers with large workforces opt to self-fund
their
STD benefits.
-FAS 112 requirements - -Also, employers subject to Statement 112 of the
Financial Accounting Standards Board (FAS 112) need to annually estimate
the
, accrued liability for these benefits, put aside (reserve) funds for it and report
it on
their annual financial statements. Employers that purchase short-term
disability
policies have no such obligations since their financial obligation is limited to
the
monthly premiums.
-Benefits and shortcomings of STD group policies - -One advantage of a
salary continuation program is that it may encourage employees
to conserve their sick days for extended disability protection. Another
advantage of
such a program is that it is not deemed an ERISA plan and, therefore, not
subject to
ERISA reporting and disclosure requirements and fiduciary standards. There
are,
though, some drawbacks to this policy. Without the involvement of an
insurance
carrier, the employer has the burden of making determinations regarding
disability
criteria and duration of disability.
-Social Security Old-Age, Survivors, and Disability Insurance (OASDI)
program - -The Social Security Old-Age, Survivors, and Disability Insurance
(OASDI) program
makes monthly income available to insured workers and their families at
retirement
or in the event of death or disability. The OASDI program consists of two
parts.
Retired workers, their families and survivors of deceased workers receive
monthly
benefits under the Old-Age and Survivors Insurance (OASI) program.
Disabled
workers and their families receive monthly benefits under the Disability
Insurance
(DI) program.
-SSDI eligibility requirement - -The OASDI program provides for monthly
disability insurance benefits after the
onset of a severe physical or mental impairment. To become entitled to such
benefits,
a worker must:
(a) Be insured for disability under the Social Security Act
(b) File a claim for disability insurance benefits
(c) Meet the definition of disability set forth in the act
(d) Complete a five-month waiting period
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