Emily Igrejas, Lincoln product manager, joins our podcast today -- and brings us her expertise in disability coverage and how it interacts with PFML. She clarifies the complex layers of information surrounding STD in the PFML landscape, as she:
AM-LVSTD-AUD001 8/23 Z01 LCN-5908331-082523
©2023 Lincoln National Corporation. All rights reserved.
Emily Igrejas, Lincoln product manager, joins our podcast today -- and brings us her expertise in disability coverage and how it interacts with PFML. She clarifies the complex layers of information surrounding STD in the PFML landscape, as she:
AM-LVSTD-AUD001 8/23 Z01 LCN-5908331-082523
©2023 Lincoln National Corporation. All rights reserved.
Hi everyone. This is Karen Batson marketing manager for leave and disability at Lincoln Financial Group. We are having many conversations about paid family and medical leave these days. And we often talk about how short term disability fits with these new programs. In this episode of Lincoln Absence Advisor, I sit down with Emily Igrejas, disability product manager to discuss the value of STD in this changing leave landscape. Hi Emily! Why do you think the value of STD is part of the ongoing PFML conversation?
Emily Igrejas:Yeah, you know, it's an interesting topic because of course the landscape is changing so much with the emergence of these PFML or paid family medical leave programs in various States. And so that alone is a pretty new concept to people. You know, whether it's employees, employers, our broker and consultant partners. So just understanding those programs is certainly a hurdle to overcome. And then on top of it, you know, short term disability has certainly been around for a long time, but, um, it's like anything else it's, you know, insurance and while I might be in the weeds and, living and breathing it every day, not everyone else is so understanding short term disability insurance, and, you know, even without PFML understanding the value for it, the important income protection that it provides to you is really, something that folks need to understand. When you layer in the impact of paid family medical leave and understanding that there are some very unique differences between the two programs and understanding why it's important to, u m, have both and have important coverage in place. That's a really important conversation to be having and w hen we've been having very frequently as a result of the emergence of these PFML programs,
Karen Batson:Let's jump into the questions that get asked first, how do you coordinate STD with these, right? So when you get this question of coordination, what are some of the important points that y ou like to make to someone right out of the gate?
Emily Igrejas:You know, when it comes to coordination, uh, like, like almost everything else, it's really important for folks to remember that, you know, each state, each paid family medical leave state is really unique. They're going to determine their own rules, their own stance on how their paid family medical leave benefits should coordinate with other benefits that are payable at the same time. So things like short term disability or a company paid policy. So it's important to remember that each state really stands on its own, and you have to understand what each states rules and regulations are. You know, what's nice and what we know about the States that have passed this legislation today is that employees are allowed to receive up to a hundred percent of their wages when they're receiving it from a combination of those sources so, like I said, you know, short term disability or STD, whether it's a company paid employer offered type of benefit or policy so that when you add all of those sources together, what the employee is receiving from those sources, as well as the paid family medical leave, all of that can equal up to a hundred percent of their earnings, which is really great. And one important principle to keep in mind with coordination is that the state is primary and all of these other supplemental benefits, like short term disability or company paid leave that we're talking about, those are considered secondary. And sometimes people talk about this another way, right? Like the state pays first, and disability or short term disability p ays second. And this is a key concept, and I'm sure one, w e'll probably dig into in a bit, but it doesn't mean that one w ill pay their benefit and then it ends, and then another benefit picks up and they start paying their benefit. But rather the state pays that main benefit, you know, in this case, a paid family medical leave benefit, and then any other benefits that are payable during that time would be secondary to that. And then, and then layered in.
Karen Batson:So within those layers, what does a short term policy then contribute to the employee's financial protection?
Emily Igrejas:Yeah. When we talk about short term disability and coordination and the value there, it's sometimes referred to as integration, right? So you're talking about short term disability plans and being integrated with these other benefits, but the aim is really to replace a certain percentage of an employee's income. You know, typically they're around 60%, again, that's to be from all the sources of the benefits that they're receiving and that's due to the particular reason of them being out of work. U m, you know, integrated short term disability plans are not typically designed to provide a hundred percent wage replacement. And really that is intentional and by design so that, y ou k now, the employee has some incentive to be returning, to work, to returning, to full time wages a nd, and with respect to paid family and medical leave. This means that if the short term disability plan is integrated, that PFML, that paid family m edical benefit is treated as an offset and an offset simply means that it's a reduction. So, you know, if the PFML benefit is an offset, that means whatever's going to be payable under the PFML benefit. We're going to take that offset or reduce it from that short term disability benefit that's payable. So, um, really, you know, overall, we're talking about ensuring that an employee has a certain level of income replacement, should the need arise. You know, whether it's a, an anticipated disability where they have a plan surgery, or, you know, an unexpected illness or injury comes up, they have a certain amount of income replacement and protection in place.
Karen Batson:What happens if short term disability is not integrated?
Emily Igrejas:Yeah. And that sometimes does happen with certain plan designs if the short term disability is not integrated, you know, again, typically you'll see it integrated, but you may hear of these non-integrated plans. Um, sometimes they're called top off or top up plans and these benefit plans are typically providing a lower benefit percentage. So where we were just talking about a typical example of, you know, 60% in a non-integrated scenario, that might be say only 20%. Um, but it also means that the other benefits that are payable during that time period, such as, you know, paid family medical leave, they're not treated or considered offsets. So we wouldn't reduce the short term disability benefit by whatever amount the paid family medical leave benefit is. And so these type of plan designs are typically intended to enhance what an employee would be receiving through the state. You know, going back to the name of being top off or top up it's to it's to be designed with the intent of getting the employees up to a hundred percent of their wages or trying to make them whole recognizing that they're getting the majority of their pay through the state. And then this adds a little bit more that lower benefit percentage to bump them up just a little bit more.
Karen Batson:We talked about plan design, and earlier you mentioned each state is unique. How do those come together in practice?
Emily Igrejas:That's a great question. And really, I think the principle to always remember is that each state is unique, especially when it comes to understanding coordination and how a paid family medical leave benefit might be impacting a short term disability benefit or a company paid policy. So let's take the handful of States that have come out with paid family medical leave programs. We've got Washington state, there's, Washington, DC, Massachusetts, Connecticut, and Oregon. And the great thing as it stands right now is that all the States allow for paid policy coordination. And, and what this means is that there's not a complete bar to an employee to only receive their benefits through the state. They're able to supplement that from other sources like we've been talking about, you know, short term disability, or again if an employer provides some type of company paid leave program. And, and again, those benefits would be considered an offset. So the short term disability benefit's going to be reduced by that paid family medical leave benefit amount that the employee is receiving through the state. Um, but once we start to understand some of the details and some of the different rules and regulations that these States have come out with, and some of them are still in the rulemaking process, this is where you start to see some of the f ine r ules, and we have a couple of States already that have different distinctions and, you know, Massachusetts is a good example. They give employers the option of allowing their employees to supplement with paid time off. And while other States allow that the distinction there is that the employee has to elect to use it, It can't be forced upon them. So you start to see little things like that. We have a particular, another nuance with Connecticut where employers can allow that, you know, paid time off or vacation or PTO to be used or require employees to substitute paid family medical leave with, with PTO. But, um, the employee needs to be able to retain at least two weeks of PTO or time off. So again, a specific nuance like that, that's very state specific. It's really important to understand each of these, um, rules and understanding that each state determines their own rules so that there may be differences. You know, overall there might be some similarities, which is good, but each, each state is, you know, this is the challenging part, having little different distinctions. You know, another example is Massachusetts coming out with a stance that employers are eligible for reimbursement from the state fund if they're making payments to an employee that are equal to, or greater than the employee's benefit that they would be receiving through the state for their paid family medical leave benefits. So there's a lot to learn there about how that reimbursement function's going to work. But again, as you start to peel the layers back and understand each state is really unique, understanding how that impacts an employer's overall benefits package and employees' different benefits that they might receive, um, becomes very challenging. And then why we're, we're digging into the topic and having the conversation.
Karen Batson:So we talked about STD but overall experience for the employer to administer and the employee who sees themselves as just absent from work. What are key points that we like to talk about in regards to the process, or just making it more easily understood?
Emily Igrejas:There really is no one size fits all with these programs, you know, whether you're comparing one paid family medical leave program to another paid family medical leave program. Um, and it's important to remember, right. That an employee might be out of work for that one particular reason, but they may be covered by multiple leave programs and it's a really good point because for a lot of folks, you know, it's just an absence. It's, I'm out of work for whatever reason I broke my leg. I had an accident. And again, going back to the earlier point of not understanding the complexities of insurance and all of these different benefit programs, you know, to just a, an employee, they, they don't understand that they're one absence from work that, you know, breaking their leg is now going to trigger, you know, five different leave or benefit programs. And, and so really it's important to remember that while these programs all might be running and happening at the same time, they are very distinct. Um, and within those various programs, there are different provisions that need to be reviewed different things that are being looked at and evaluated to determine what someone's going to qualify for and what someone may not qualify for. And, you know, what you see from state programs, you know, generally speaking in the sense of whether it's paid family medical leave or, um, that specifically that medical leave component, but also statutory disability programs, those thresholds to meet those requirements are standardly going to be lower right, they're going to be broader, easier to satisfy than say something like short term disability.
Karen Batson:Are there some additional distinctions to remember?
Emily Igrejas:Sure. Another key distinction, I would say would be, you know, what's required to prove the threshold or these various definitions and provisions we've been talking about, u m, proving that they've been met and satisfied that can really vary greatly as well. U h, you know, traditional statutory disability States, they might only require a simple out of work note from the doctor, right? That's something simple that says, you know, E mily's out of work from this date through this date, and that can be enough information to approve a statutory disability claim. On the other hand, take something like short term disability. Typically that out of work note is not going to be sufficient. You know, they're typically going to be looking for more, you know, actual medical documentation, perhaps copies of a particular office visit, u m, when they went to see the doctor, whether they have, you know, certain diagnostic t est results and that's typically going to be needed in order to evaluate and make a determination on that claim. And again, this goes back to understanding the various definitions that these different programs have, you know, short term disability's, looking at a specific definition of disability so you need to make sure that the medical information supports that. And that's why sometimes they need more information than just a simple out of work note. But, you know, conversely you could have the exact opposite, you know, type of scenario where it could be really straightforward and someone could have a car accident. They could be inpatient in the hospital, someone's requiring multiple surgeries. You know, they're going to meet that threshold across the board, across all of those different benefit programs out there. So really the key point here is that this can really vary case by case. And unfortunately there's no simple straight answer, you know, especially when it comes down to specific claim examples and employee specific so, you know, understanding that the nuances exist and that there are different definitions, different provisions that can be really helpful in just having a better understanding of these benefit programs.
Karen Batson:We discussed a lot of key concepts on how STD works in particular, how it coordinates with PFML, but it kind of brings up the question. Is it still valuable as a product now versus maybe 10 years ago?
Emily Igrejas:Absolutely. Yeah. And a really timely question. And I will say one, we've been hearing a lot about, I would say there's a strong misconception out there about, you know, the continuing need for short term disability, especially with the emergence of these new paid family and medical leave programs. And so we will sometimes that, Oh, I don't need short term disability anymore. Or there's a misconception that PFML is short term disability and, you know, other components like being able to take care of a sick family member or bonding and, and that sort of thing. So I would say, yeah, absolutely there is even more so the need and value of STD. And we are trying to strongly educate and inform people about the value of STD because it's a strong hurdle to overcome this misconception and it is easily understood. And in my opinion, you know, again, I'm living and breathing this stuff every day. So I understand it. And I get the differences between the programs and understand the need for short term disability. But if I am someone who does not have an insurance background and I'm, you know, getting a notice about a new paid family and medical leave program, that my state now offers me that I'm also required to contribute to, you know, I'm seeing deductions come out of my paycheck for this program. And I'm just looking at the high level summary of what that benefit provides me. And then I'm thinking about my enrollment period with my employer and seeing the high level description of short term disability. I can absolutely see how someone's going to think these are the same thing, and I don't need to have both. Um, but we definitely want to promote the value of short term disability and recognize that, you know, it's important for people to understand how these programs work together, how they compliment each other, and that there is a lot of extra value that short term disability really provides. And this educational piece and understanding I think becomes even more critical when you think about employee paid coverage. So that's when the employee is the one who's paying for either all or a portion of their short term disability coverage or their premium, for example. Um, because again, you know, it's, if they don't understand how it works, what they continue to gain from having the coverage and having short term disability coverage in place, you know, they might decline or say, I'm not going to elect short term disability and then have an event come up later, you know, disabling them in the year and realize they're not as covered as they, they thought they were.
Karen Batson:When we discuss the value of STD, are there key points to remember when it comes to the financial impact of short term disability?
Emily Igrejas:You know, the financial impact is a big one. I mean the big value of short term disability in of itself is the protection, the protection that you get from your income replacement, you have an event that takes you out of work and it could be unexpected, u m, and unplanned for, and you need to be able to have a certain amount of income coming in while you're now taking care of yourself and your bills are going up because you're now having to take care of whatever illness or injury is taking you out of work and not allowing you to be able to earn your regular income. If you look at the benefit itself, what's actually payable through the state for a paid family medical leave benefit, they all have, you know, at a certain glance, it might look like they're replacing a very high level of income. You know, maybe it's 80% or 90% and you think, Oh, well, that's already higher than my 60% on my short term disability benefit. But another key concept to keep in mind is that these States are also setting maximum benefits that are payable. So regardless of what that percentage might equate to for a particular employee, the state is going to cap that benefit at a certain amount, you know, Washington example, t heir state maximum it's a thousand dollars a week. So to keep that in mind, certain employees, and they might be, you're more, you're more high wage earners, but if t here were to rely solely on that paid family medical leave benefit through the state, they might actually have way less income replacement than they think. And again, that's because they're going to get capped at that maximum while just thinking, Oh, I have a high percentage of income replacement coming in. So they're really actually at risk and not having as much income replacement than they think. Another key consideration I would say would be. Um, if you, if you think about it in terms of coverage or entitlement maximums with these paid family medical leave programs. So just take the name PFML right. Family and medical. It's important to remember that paid family medical leave is not just for someone's own condition, but they can take advantage of the benefit to take care of a loved one. Um, for bonding reasons, if they have a new baby, and once someone exhausts their paid family medical leave benefits in a given year, again, they could be left with little to no income replacement, should a disabling condition arise later in that year and take them out of work. Um, you know, those state programs are typically providing a limited number of work weeks of paid leave. And it's typically designed to be capped within any 12 month period. Um, so if you think about short term disability, that is only designed for someone who is unable to work, so they're their own condition themselves, but they can also provide benefits of a greater duration since short term disability is commonly determined on that per claim basis, right? Rather than that, you know, 12 month rolling period of time. So you could have somebody say they have an accident, um, you know, a car accident or they break their leg. Something happens where they're out of work for a specific period of time. They, you know, return to work. And then later in that year, they happen to be diagnosed with, with some sort of serious illness, um, say something like cancer that, um, you know, is going to take them out of work again. On a paid family, medical leave basis, they would have knocked down or exhausted their entitlement earlier in the, earlier in that year because of their accident. Um, without that short term disability, they could be without income and be left with potentially a gap between their paid family medical leave and the start of their, their longterm disability, which hopefully they have that coverage, which is typically going to follow that, that short term disability duration.
Karen Batson:What about features that go beyond the dollar. Does it a state program provide any consultative support.?
Emily Igrejas:When you think about an absence as a whole and the employee experience, and also you could argue to the employer experience as they're navigating this and trying to juggle and manage all of the different absences that their employees are going through, you know, short term disability policies, they do offer additional features, additional resources, again, not just for the employee, but also things that our employer facing. And, and to your point, u h, these are not standardly going to be available under a paid family medical leave program through the state. I mean, the state is standing up these programs and they're requiring, you know, very minimal documentation to a pprove their claims. And really it's more of a processing, you know, from a disability perspective, you know, especially from the carrier perspective, we always are trying to provide much more consultative support than that. You know, there could be features that are in the policy that, that do provide some additional, um, financial support or, or just ease the way the process works. And those could be, you know, ways to waive or satisfy that elimination period or waiting period that we were talking about earlier. Things like supporting and encouraging return to work through partial disability benefits, vocational rehabilitation benefits, even just the vocational rehabilitation staff that we have that, uh, is always really trying to identify return to work opportunities and coordinate return to work for both employees and employers. So there's certainly a host of, I would say, consultative support that, that a carrier is able to offer that comes with, you know, short term disability as, as a whole. The employer side, they're also trying to manage all of this, you know, some of their benefits they might be paying to the employee, some we're paying, you know, um, they might also have to be then dealing with the state. So it's nice when it can all be under one umbrella and we're helping to, to administer all of that on their behalf and have it consolidated just to really provide a better ultimately employee and employer experience throughout the process.
Karen Batson:Well, thank you so much. It was a great conversation.
Emily Igrejas:Thank you. It was really great to be here.
Karen Batson:To everyone listening. Thank you for joining us. We will continue to cover topics that help employers and their employees navigate through this new environment. So be sure to subscribe to Lincoln Absence Advisor on Apple, Spotify, or wherever you get your podcasts,
Disclosures:The information contained in this podcast is for general use and is not a substitute for the advice of an attorney or your human resource professional. Lincoln Financial Group is the marketing name for Lincoln national corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.