You can almost hear the nervous laughter reverberating across financial markets with the jump in yields on the longer end of the yield curve. Since the end of January, yields on the 10-year Treasury n...
In a competitive job market, finding and keeping top management talent is more difficult than ever, and providing benefits that increase financial security is one of the best ways to find and keep 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 then 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 an 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.
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 other defined contribution, defined benefit, or nonqualified benefits that may represent an even higher percentage of an executive’s expected retirement income?
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:
Promote long-term rate stability, for both Group LTD and Individual Disability plans
Eliminate Group LTD deficiencies and improve the overall quality of your executive benefits plan
Meet the expectations of your Executives in the event of a disability
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
More comprehensive Executive Benefit offering
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
This post was originally featured on SWBC's BusinessHub blog.
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