Disability Plans for Executives
It’s important to note that executive disability plans are not the same as ‘regular’ disability plans. While the difference is subtle it can be significant. The top income earners in any business corporation are the executives. These are the people who earn the big pay cheques along with handsome performance bonuses and other forms of compensation. They also receive a benefit package. But when it comes to disability benefits, these same executives are the ones who receive a reduced level of benefit, called reverse discrimination. This is when the income replacement ratio drops as compensation increases creating an imbalance in income protection.
- The long term disability (LTD) benefits executives receive are the same ones that everyone in the employee group receives, with stated maximums that vary depending on the size and earning of the group. While these benefits have been designed to adequately cover the group as a whole they may not adequately meet the needs of a high earning executive.
- When determining the benefit calculation the income number used often does not include the ‘other’ sources of income that factor into the total executive compensation such as bonuses, commissions, profit sharing, stock options and the like.
- When developing employee LTD plans, all too often employers are simply unaware of the differences between group and individual plans and the various options available
Here’s how to fix it:
- Offer your key executives the option of ‘topping up’ their disability coverage.
Want to know more about creating an executive disability plan for your key executives? Give Jacqui McFarlane a call – she’s knowledgeable and experienced and has helped many companies just like yours.