Chapter 51

Chapter 51

Long-Term Disability Insurance

lEARNING oBJECTIVES:

  1. Have a basic understanding of group long term disability insurance

REVIEW:

This chapter looks at group long term disability insurance coverage. As with short-term coverage, long term disability insurance per se is not covered in depth, just the group coverage implications. The section on design features focuses on eligibility, definitions of disability, and benefit formulas. Tax implications focus on taxability of benefits. Long term disability plans are considered ERISA welfare benefit plans. Following a reference section, the chapter ends with a brief question and answer section.

Chapter Outline:

A.What Is It?

B.When Is It Indicated?

C.Design Features

1.Eligibility

2.Definition of Disability

3.Benefit Formulas

D.Tax Implications

E.ERISA Requirements

F.Where Can I Find Out More About It?

G.Questions And Answers

H.Chapter Endnotes

FEATURED TOPICS:

Group Long term disability insurance

CFP® CERTIFICATION EXAMINATION TOPIC:

Topic 35: Group disability insurance

A. Types and basic provisions

2) Long-term coverage

COMPETENCY:

Upon completion of this chapter, the student should be able to:

1.Have a basic understanding of group long term disability insurance

KEY WORDS:

long term disability, qualified for definition of disability, regular occupation, own occupation, partial disability, total disability, integration of benefits

DISCUSSION:

  1. Discuss alternatives to the classic employer-paid long term disability plan.
  2. Discuss the impact of the different definitions of disability.

QUESTIONS:

1.Which one of the following definitions of disability is considered to be the most liberal?

a.Social Security definition

b.qualified for definition

c.own occupation definition

  1. modified own occupation definition

Chapter 51, pp. 383, 384

2.Which one of the following federal tax laws place restrictions on an employer’s ability to design a disability income insurance plan that integrates with disability benefits from other plans?

a.no federal tax laws apply

b.HIPAA

c.ERISA

  1. Civil Rights Act

Chapter 51, p. 384

3.Under which one of the following circumstances will employee-paid premiums for long term disability insurance be deductible to the employee?

a.when the employer pays a partial premium and the employee pays the remainder

b.when the employer bonuses the payment amount to the employee

c.when using payroll deductions

d. under no circumstances

Chapter 51, p. 384

4.Which of the following requirements must be met in order to have the possibility of both employer deductible premiums and non-taxation of employee disability benefits being provided?

(1)the benefit is based on permanent loss of use of a member or function of the body

(2)the benefits are specifically paid from a cafeteria plan

(3)the benefit is computed by reference to the nature of the injury and not to the period the employee is absent from work

(4)an FSA is used to pay for benefits

a.(1) and (3) only

b.(1) (2) and (3) only

c.(2) (3) and (4) only

  1. (1) (2) (3) and (4)

Chapter 51, p. 386

ANSWERS:

  1. c
  2. a
  3. d
  4. a