DISABILITY BENEFITS
Temporary Disability Benefits :
What You Need To Know
BY : BARRY FIELDS , VICE PRESIDENT OF EMPLOYEE BENEFITS
There are very few changes a company can make to its benefits program that can achieve cost savings with absolutely no downside to the employees or the company . Changing the administration of your company ’ s temporary disability benefits ( TDB ) program is one of them .
In New Jersey , all employers must provide TDB to their eligible employees . These benefits must cover two-thirds of an employee ’ s pay , up to a weekly maximum of $ 633 ($ 615 in 2016 ). What many employers do not realize is that these state-mandated benefits can be administered by a private plan through an insurance carrier rather than by the state plan through the state of New Jersey . Private plans must be at least as liberal in benefit amounts , eligibility requirements and duration of payments as the state plan .
Here are some of the advantages of working with an insurance carrier when providing TDB to eligible employees :
• Significant cost savings ( typically 20 percent or more ) AND the carrier absorbs the state annual assessment fee .
• Better administration , customer service , claims turnaround , employer reporting and coordination with your Long Term Disability program ( if such a program is offered ).
• Cover your employees who work outside New Jersey with the same benefits .
• Opportunity to provide better benefits than what the state requires , either paid for by the company or as a voluntary buy-up by the employees .
Here are the details on how it works :
• If your temporary disability benefits are currently administered by the state of New Jersey , the company pays the state based on its Experience Rate , up to the taxable wage base for each employee . Meanwhile , the company also collects the employee ’ s contribution to the plan .
• By changing the administration of the plan from the state to an insurance carrier , there are no changes to what you collect from the employee . For 2016 , that amount was 0.20 percent of taxable wages , up to the taxable wage base of $ 32,600 ($ 65.20 annual maximum ). In 2017 , it ’ s 0.24 percent , up to $ 33,500 ($ 80.40 annual maximum ). Most companies collect from their employees , but some companies do not .
• The Experience Rate offered by an insurance carrier will be lower than the rate charged by the state and the carrier will not charge the company the state annual assessment fee , which was 3.31 percent of annual taxable wages in 2016 ( 2.76 percent in 2017 ).
• Rather than paying the state , the company will pay premiums to the carrier on a quarterly basis in arrears based on its new ( lower ) Experience Rate and the applicable taxable wages . At the end of the first quarter and each quarter thereafter , you will receive a self-administered bill from the carrier where you report the taxable wages for all employees for the prior quarter . When someone reaches $ 33,500 in pay ( the taxable wage maximum in 2017 ), you stop paying for that employee for the rest of the year — just like with the state .
For instance , let ’ s say someone earned $ 40,000 in the first quarter . You would only report $ 33,500 in taxable wages for that person in the first quarter and then $ 0 for the next three quarters . At the end of the year , the premium should be pretty low .
It may sound too good to be true , but most of our clients are covered by a carrier rather than the state . In 2016 , we saved a new client about 30 %. The insurance carrier simply replaces the state , you pay a lower premium to the carrier , you no longer have to pay the 2.76 percent state annual assessment fee and the employees get the same benefits required by New Jersey — but with better customer service . The state will allow the transition to an insurance carrier either on January 1st or April 1st , so there is still plenty of time to make the transition by April 1 , 2017 .
It is easy to get TDB proposals from insurance carriers and it ’ s also easy to make the transition . Please contact JGS Insurance for more information . +
Barry Fields has over 26 years of employee benefits experience advising clients in a wide range of industries , professional and industrial , public and private , throughout the United States and worldwide .
Barry specializes in all aspects of providing full-service benefits consulting to clients including program design , compliance , plan funding , underwriting , wellness programs , employee communications , benefits administration , employee advocacy and the use of effective strategies in benefits management .
8 | SPRING 2017