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Addressing the Benefits Coverage Gap for Executives

In a competitive job market, finding and keeping executive management talent is more difficult than ever, and providing benefits that increase financial security is one of the best ways to recruit and retain top talent. Your organization could be missing a particularly vital aspect of employee benefit plans that help ensure the financial security of your key talent, and, ultimately, their loyalty to your organization. Unfortunately, many companies discover this the hard way—when a highly compensated executive (HCE) suffers a long-term illness or serious accident and has to manage a physical recovery with as little as 20–40% of their pre-disability income.

During a period of disability, traditional group Long Term Disability (LTD) benefit maximums and taxes can significantly limit monthly benefits. Additionally, group LTD plans often exclude major components of a HCE’s income, including incentive compensation and retirement plan contributions. This can result in your key talent receiving considerably less benefits than other employees. As compensation levels increase, this effect becomes increasingly pronounced, with top officers bearing the brunt of the financial burden on their own.

The Increasing Need for a Reliable Income Stream

Today, employees are largely responsible for managing and funding their own retirement, and an extended disability can severely impact long-term financial planning. A question of particular significance is, in the event of a disability, how would HCEs make contributions to their 401(k) plan to ensure continued funding? What about the negative impact of not working due to a disability on other defined contribution, defined benefit, or nonqualified benefits that may represent an even higher percentage of an executive’s expected retirement income?

Addressing the Shortfalls: Supplemental Income Protection

A well-designed Multi-Life Disability plan can layer, coordinate, and enhance an existing group LTD plan, reducing or eliminating the inherent shortcomings and income replacement gap for your highly compensated employees. Individual disability policies offered to your HCEs can include significant discounts, minimal underwriting, and other advantages that address the shortfalls in traditional group LTD plans.

The goals of Supplemental Income Protection for HCEs include:

  • Promoting long-term rate stability, for both Group LTD and Individual Disability plans
  • Eliminating Group LTD deficiencies and improving the overall quality of your executive benefits plan
  • Meeting the expectations of your executives in the event of a disability

Advantages of Supplemental Income Protection from SWBC

Executives Experience:

  • 20-40% lower rates than if they were to purchase on their own
  • No extensive medical tests or intrusive questions
  • Higher overall income replacement
  • Individually owned and fully portable policies
  • Locked-in premium rates and features
  • High-quality coverage that cannot be cancelled by the insurance carrier

Employers Experience:

  • More comprehensive Executive Benefit offerings
  • Rate stability—helps mitigate risk of large and expensive claims on group LTD plans
  • Flexible funding, plan designs, and eligibility options
  • Enhanced recruiting and retention of key talent
  • Simple implementation and minimal ongoing administration

To learn more about how SWBC can help your organization craft an Executive Benefits Compensation Strategy, visit our website.

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Related Categories

Recruiting & Employee Retention

Joan Cleveland, CLU, ChFC, REBC

Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the Consumer Credit Insurance Association, the Texas Association of Life and Health Insurers, as well as the Life Insurers Council. In addition, she is chair of LIMRA’s Strategic Marketing Issues Committee.

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