Disability benefits: are your executives protected?

Typically, employers rely on generous compensation package to attract and retain key employees. However, the important role employee benefits play is often underestimated. In fact, employee benefits are a powerful part of any employee’s compensation, including highly compensated employees.

Having a high income does not preclude concern about personal financial risk. MetLife’s Annual Employee Benefit Trends study reveals that 42% of highly compensated employees are very concerned about the financial effects of a loss of income in the event of a disability.
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What employers may not realize is that highly compensated employees could be at a disadvantage when it comes to employer-provided group benefits – especially income protection benefits. Typical group income protection benefit plans fall short for highly compensated employees, exposing them to critical coverage gaps.

An executive carve-out program is one cost effective solution. This strategy creates a pool of highly compensated employees and provides higher coverages and tax advantages, while leaving the group plan untouched.

Individual disability income protection is another option. When combined with a group long term disability plan, an individual disability income policy provides employees an opportunity to insure income beyond the group plan maximum. These policies are portable and can often be customized with options such as cost of living adjustments and /or catastrophic disability benefits.

Benefit maximums, tax implications, and covered compensation limitations can result in benefits that are far less than expected at claim time. Carve out and individual programs are an efficient way to solve the challenge without straining the benefits budget or resources.

Employers that recognize and take steps to close the coverage gap not only help to satisfy and retain key employees, they have an advantage when competing for critical talent.
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