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.
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.
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:
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:
When considering if a Supplemental Disability Plan is right for your organization, ask your team these questions:
Interested in learning more? Contact the Executive Benefits Team at LoVasco Consulting Group.
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.
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