Page 134 - Group Insurance and Retirement Benefit IC 83 E- Book

a percentage of gross earnings being the most typical method. While options range from
50% to 70%, 60% or 66b% are common. An upper limit generally applies to the amount

of monthly benefits available-such as $6,000 or $8,000 per month. In other words, the
benefit paid is the lesser of the dollar maximum or the specified percentage of earnings.

Different maximums apply at different income levels in order to retain the incentive to
return to work and avoid over insuring. As is true for STD policies, different percentages

maybe used at different income levels: higher percentages for lower incomes, lower

percentages for higher incomes. Similarly, LTD plans specify monthly minimum benefit
amounts as well.

Some plans use different percentages for the same individual's income, paying a higher
percentage for income up to a certain dollar amount and a lower percentage for all

income that exceeds that amount. Suppose Rosanne O'Malley earns $7,000 per month.
The LTD plan her employer provides pays 66b% of earnings up to $5,000 and 40% of

amounts from $5,001 up. O'Malley's monthly benefit is determined like this:

$5,000 x .667 = $3,335

$2,000 x .40 = $ 800
$4,135 Total Monthly Benefit

The actual percentages that apply when this split percentage arrangement is used vary

from insurer to insurer.

Rehabilitation Benefit

Because of the good experience insurers have had in providing payments for

rehabilitative services for disabled insured‘s, more and more group LTD plans today pay
some form of rehabilitation benefits.

While the specific details vary from plan to plan, it is typical to as encourage a disabled

employee to return to work by paying a reduced benefit during a ―trial‖ work period.