Here in 2019, the U.S. Department of Labor has given all U.S. employers the option to auto-enroll their employees in disability insurance if they have a plan that is ERISA-covered. This regulation is quite significant and should be carefully viewed and understood by all employers. Disability benefits are meant to ensure that employees keep their income if they should be unable to work due to a qualifying disability.
According to the Social Security Administration, 1 in four American workers aged 20 years old will be out of work for at least a year before they retire. This is a figure that might surprise most employers, and is something that they should prepare for. This can be especially hard on employees, because about 70 percent of working Americans say that they would find it either “somewhat” or “very difficult” to pay their bills if they lost only one week of pay. Even though this is true, less than half of U.S. employers actually offer short or long term disability coverage for their employees. These numbers are the driving force behind the U.S. Department of Labor recently ruling to expand auto-enrollment programs.
The Benefits of Auto-Enrollment
Employers who auto-enroll their employees in voluntary long-term disability coverage will get up to 75 percent of employees to participate. This is compared to just 25 percent of employees who participate when the decision is left entirely up to them. Many employees don’t realize they will need disability insurance until something catastrophic happens.
It’s easy to see the benefits of disability insurance for employees, but what about employers? Adding auto-enrollment can improve the financial situations of employees, which in turn, can boost morale. Additionally, disability insurance is a highly attractive benefit for many employees and can help attract quality workers to your company. This is especially true for older employees. Lastly, enrolling employees in disability insurance can save employers from the headaches that come when uninsured employees can’t work due to a major illness or injury. This in turn, also improves the relationship between employer and employee, which can help boost productivity.
Be Sure to Communicate
As with any changes to your benefits packages or workplace healthcare coverage, it is imperative to communicate these changes with your employees. Give employees a few month’s notice so that they can make the right decision to voluntarily keep their disability insurance. Clearly communicating the obvious benefits of disability insurance will help minimize the number of employees that decide to opt-out from this important coverage.
It isn’t an easy discussion to have, but the fact is that a quarter of every American employee will be out of work due to disability or illness for a significant amount of time before they retire. Having these conversations ahead of time will help educate your employees on disability insurance and how other coverages like worker’s compensation can be limited.
If you have any questions or concerns about how auto-enrollment for disability insurance could impact your stop-loss coverage, feel free to give us a call. The stop-loss experts at Prodigy are ready to answer your questions and set you up with a stop-loss policy that could help your funds should you need to pay disability coverage to an employee.