Is Your Executive Benefits Plan Missing Something?

Insight By
Gene LoVasco
Topic
Executive Benefits

An executive benefits program is one of the key strategic levers employers have to attract top-notch talent, retain high-performing executives, and motivate leadership teams to achieve critical objectives. Is this lever as strong as it could be at your company? Given today’s climate, it’s important to evaluate how your offerings measure up against competitors and decide if there is more you could do to maximize your executive benefits.

Why Consider Offering an Executive Benefits Plan?

Many employers offer Group LTD plans, which commonly cover 60 percent of an employee’s income up to a maximum monthly benefit — often $5,000 per month. That’s often adequate for most employees. However, for key executives — many of whom are earning far more than $100,000 a year — capping the coverage at a maximum of $5,000 a month means they are receiving a proportionally lower level of coverage compared to the rest of the employee population, in many instances even less than 40 percent.

In addition, Group LTD plans fail to cover variable pay such as bonus, commissions, and incentive pay, which leaves many executives with an even larger gap should they become disabled.

With this significant gap in income, your executives’ ability to maintain their lifestyles and achieve their financial and retirement goals are put at risk.  

For employers that recognize this and want to differentiate themselves, Supplemental Disability Plans can give key executives an added layer of income protection.  

Who Offers Supplemental Disability Plans to Their Executives?

While certain industries have used these plans for some time, others are just starting to realize the potential value. UNUM, a leader in executive supplemental disability plans, shared their findings in a recently released report.

The most common industries that offer an employer-sponsored supplemental disability benefit include:

  • Healthcare
  • Manufacturing
  • Legal
  • Finance

Traditionally, these industries have turned to supplemental disability benefits because they have many highly compensated employees and their executive’s total compensation plan includes commissions and incentive pay that would not be covered under the base disability plan.  

As incentive compensation has become more prevalent, a growing number of industries are now providing this type of benefit to the executives, including:  

  • Technology
  • Professional Services
  • Pharmaceuticals

6 Reasons Why Your Executives Will Value a Supplemental Disability Plan

  1. Helps fill the gap. Provides executives greater income replacement potential, commonly closer to 75% or more.
  2. Broader coverage. Includes coverage for variable compensation.
  3. Higher benefit maximums. Caps are commonly $15,000 per month.  
  4. Guaranteed standard issue. If the benefit is employer-paid, guaranteed standard issue is commonly available — meaning no cumbersome medical underwriting requirements and no exclusions due to pre-existing conditions.  
  5. No offset. The benefit is not offset by Social Security benefits.
  6. Portable. The highly compensated employee can take the policy with them if they retire or leave the company.

Would an Executive Supplemental Disability Plan be a Good Fit for your Company?

When considering if a Supplemental Disability Plan is right for your organization, ask your team these questions:  

  1. To what degree do we want to help close the income protection gap for executives?  
  2. How important is the quality of our company’s disability benefit package to our recruitment and in retaining current key executives?
  3. Does the company want to offer the same benefits to all employees or provide a higher level of benefits to our key executive team?
  4. How do our disability benefits compare to others in our industry?
  5. Would this type of plan provide our company with a competitive edge?
  6. To what degree do our executives fully understand and value their benefits? Can we strengthen the way we communicate to our executives to maximize their value and appreciation?  

Interested in learning more? Contact the Executive Benefits Team at LoVasco Consulting Group.  

Insight By
Gene LoVasco
President
File Number

Not applicable

Topic
Executive Benefits
Published on

January 26, 2021

updated on

January 26, 2021

Disclosure

This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.

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