By John McGrath
When people hear the phrase “employer-provided benefits,” the first things that usually come to mind are health-dental-vision insurance, paid time off and 401(k) plans. Odds are, disability protection doesn’t top the list.
Given the financial demands of running a small business, it’s not surprising. The priorities? Payroll, health insurance if there are more than 50 employees, and other legally required benefits.
As a result, smaller employers may be more skeptical than big-business owners about whether disability insurance is even truly necessary. To gain some insight on this topic, we spoke with John McGrath, director of business services at Allsup, LLC, who helps employers of all sizes find ways to offer disability protection access to their employees. Here’s what he had to say:
1. Why is it important to offer workers access to disability protection?
Small-business owners know firsthand how hard it is to attract and retain talent in today’s tight labor market. There are more open positions than there are people who need them, and job seekers are capitalizing on that by demanding higher salaries and better benefits packages. Employers of all sizes are having to up their offerings, but smaller organizations feel the impact of these stretched budgets more strongly. It can be a struggle to stay competitive.
The logic seems to be, “the more benefits, the better,” and offering disability protection only makes an employer more appealing. This is especially true for small-business employers, because the smaller the team, the more significant is the role that each person plays – whether they are full-time, part-time or freelance employees. Many people wear many hats, and if you own a small business, you are both the employer and the employee. Should you get a serious illness or injury, how financially devastating would that be for you and your organization? Disability protections could be the safety net rescuing your business from disaster.
2. How likely is it for a worker to experience a severe disability?
Disabilities occur more frequently than we like to think. The Social Security Administration (SSA) reports that one in four of today’s 20-year-olds will experience a disability before turning 67. And when that happens, the road ahead is anything but easy. Workers can apply for Social Security Disability Insurance (SSDI) benefits – a federal program available to everyone who has paid FICA payroll or self-employment taxes for five out of the last 10 years and meets certain education, age, work and health conditions. However, two-thirds of first-time applicants will be denied. If this happens, applicants must wait close to two years to have their case heard by a judge. That’s a long time to go without pay, and given that 44 percent of Americans can’t afford a $400 medical expense (see this Federal Reserve Board survey), this is particularly problematic.
3. If a business is unable to offer short or long-term disability to employees, what other programs are available?
The reasons for providing disability protection are clear, but how can employers find the money to afford long-term disability coverage for their workers? Fortunately, there’s a way for employers to offer long-term protection without any added cost. Employers can utilize SSDI to their advantage simply by making employees aware of their options. Programs like SSDI Extended Benefits help employers for free and ensure their employees have a trusted resource to help them navigate life after a severe disability, from helping them access SSDI to guiding them in using the Ticket to Work program if their condition improves and they are able to re-enter the workforce.
4. What does a government program have to do with employers?
Remember, both employers and employees pay for the SSDI program through FICA payroll taxes. And SSDI solves two problems for small business employers: struggling to stay competitive in a tight labor market and having the financial flexibility to increase their benefits offerings. Employees can feel they are getting the benefits they’re after, and employers demonstrate concern and recognition of their workers’ value and contribution on the job. All employers have to do, to offer this add-on perk, is be well-informed and equipped with the right resources. So really, what do employers have to lose?
John McGrath is director of business services at Allsup, LLC. McGrath assists employers and self-insured businesses with the process of evaluating their benefits programs in coordination with federal programs that their employees can access when and if needed. @Allsup.