Central PA Medicine Spring 2021 - 22

Mitigating Risk Through
Disability Income Insurance
Disabilities that affect someone's ability to work can be a serious issue for businesses
and organizations of all sizes. Whether you're a business owner or a benefits manager,
disability income (DI) insurance can help replace a portion of your employees' income
if they become too ill or injured to work. Businesses can use DI as an effective planning
tool to mitigate risk. Offering DI can also help you to recruit and retain employees.
Income Protection for Employees
If you offer group long-term disability benefits, the
coverage may only protect about half of an employee's
net monthly income. You can help your employees
reduce the coverage gap by making supplemental
individual DI insurance policies available to them. By
offering this valuable coverage as a voluntary benefit,
your employees can have added protection to help them
meet their financial obligations during a disability, at little
or no cost to the business. MassMutual offers different
DI products to meet the needs of both small and large
businesses and organizations. Depending on your
company's needs, a DI offering can be either voluntary
or employer-paid, and might be eligible for simplified
underwriting. Regardless of the design, your employees
enjoy discounted premiums and policy portability.
Retirement Protection for Employees
Your employees have worked hard to save for retirement,
and you can offer a way to help them protect the nest
eggs they have built. A major derailer for many people
approaching retirement can occur if they become too
sick or hurt to work, and are forced to tap into their
retirement savings to meet the expenses of everyday
life. A disability income policy can not only replace
a portion of one's income when a disability occurs,
but it can also be designed to help your employees
continue saving for retirement if they become too sick
or hurt to work. In this way, offering DI policies can
help your business attract talent and build loyalty.
Protect Your Business and Select Employees
For a small business, a key employee's disability can
impact the company's bottom line. However, if you
choose to continue paying that employee's salary without
having a pre-existing plan in place, tax reporting issues
may arise as the Internal Revenue Service (IRS) would
generally not recognize those payments as a business
expense. A Qualified Sick Pay Plan (QSPP), which is
recognized by the IRS and can be funded with DI, sets
company policy before a disability occurs. Funding a
QSPP with DI, you transfer the risk of a portion of that
employee's salary to MassMutual. The owner can choose
which employees will be included in a QSPP, making
it ideal for family businesses looking to offer disability
income protection for non-owner family members.
Fund Buy-Sell Agreement
If your business has multiple owners, you can use
DI to fund a buy-out option if one partner becomes
disabled, allowing for an orderly transition of
ownership. Additionally, this allows the insurance
carrier to serve as an objective third party to determine
whether a disability has occurred. If you're in a
partnership that has an existing buy-sell agreement,
it's important that you review the agreement to
ensure that disabilities are addressed and funded.
Central PA Medicine Spring 2021

Table of Contents for the Digital Edition of Central PA Medicine Spring 2021
