The components of the following substantial equivalency guidelines must be included in an employer’s Long-Term Disability (LTD) insurance plan to meet approval for benefit protection pursuant to UCA § 49-11-404. These guidelines apply to all contracts entered into after July 1, 1996.
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Guidelines for Establishing Substantial Equivalency |
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1. Elimination Period: The insurance plan must have an elimination period where the employee may not return to work for a continuous period of three months*.
*The elimination period may include a one-time trial return to work period of less than 15 consecutive calendar days.
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The elimination period may range from zero to four months.
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2. Monthly Disability Benefit: For disabilities not the result of the performance of an employment duty, the employee must receive monthly disability benefit payments equal to 2/3rds of the regular monthly salary.
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The employee may not receive a monthly disability benefit payment less than 60% of the regular monthly salary.
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3. Mental Health Benefit: The insurance plan must include mental health disability benefits.
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The insurance plan must include a mental health component. This includes a maximum of two years of benefit coverage while on mental health disability, and a benefit beyond two years if the employee is institutionalized.
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4. Benefit Reductions: The insurance plan must reduce the monthly disability benefit from certain income sources.
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The insurance plan must include reductions for social security disability, workers’ compensation, and other third-party liabilities to the employee for monthly disability benefits (or for causing the employee to be disabled).
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5. Cost of Living Adjustments: The insurance plan must include an annual Cost of Living Adjustment (COLA) for the employee’s monthly disability benefit payments.
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The benefit payment must include a COLA. The COLA may be related to the system covering the member. The number of COLAs cannot be limited.
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6. Exclusions: The insurance plan must include exclusions where the monthly disability benefit will not be paid.
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Monthly disability benefit payment exclusions must include participation in a war, self-inflicted injury, and felony convictions. Exclusions may include, but are not limited to, active participation in a riot, assault and battery, drug abuse, alcoholism, not under the care of a regular physician. Exclusions cannot include dangerous sports.
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7. Rehabilitation: The insurance plan must include a rehabilitation program.
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The insurance plan must have a rehabilitation program. However, the employer or carrier may determine their own rehabilitation criteria.
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8. Employee Coverage: The insurance plan must cover all eligible employees if an employer elects to cover any of its eligible employees.
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Covered employees are required to be eligible for participation in URS and be active members. If an employer elects to cover any of its eligible employees, all eligible employees need to be covered (exceptions are those under the Tier 1 Firefighters Retirement System or legislators).
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9. Benefit Terminations: The insurance plan must terminate the monthly disability benefit when certain criteria are met, but the plan cannot be terminated based on the employee’s receipt of a lump-sum benefit payment.
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The insurance plan must terminate the monthly disability benefit at the earlier of when the employee is no longer disabled; or when the employee is eligible to receive full retirement benefits; or when the employee has received the monthly disability benefit for the maximum benefit period (see component 10). Benefits cannot be terminated based on the employee’s receipt of a lump-sum benefit payment.
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10. Disability Duration of Benefits: The insurance plan must terminate the disability benefits when the employee has received a monthly disability benefit for the maximum benefit period.
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The maximum benefit period is two years, if the employee is unable to perform the duties of their own occupation. Thereafter, if the employee is unable to engage in any occupation which is reasonable (considering the employee’s education, training, and experience), the maximum benefit period may be extended. To meet substantial equivalency guidelines, the maximum benefit period must match or provide a greater benefit period than the table displayed below.
Age at Disability Maximum Benefit Period Less than age 60 To age 65 60 60 months 61 48 months 62 42 months 63 36 months 64 30 months 65 24 months 66 21 months 67 18 months 68 15 months 69 and over 12 months
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