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 information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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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