by Bill Olmsted
There are a select few states that offer their own residents temporary disability insurance protection in the event an illness or injury disables and prevents them from working. There are a variety of questions that arise about how these programs actually operate and pay benefits.
- What will I get paid in a benefit?
- I have coverage on my own or through my employer - how will this impact the amount I get from the state plan?
- Are these benefits fully taxable?
- What if I return to work and I run my own business. Will this coverage still pay me since I show an income loss?
These are just some of the many inquiries many Americans typically think about when looking at disability insurance protection. Outlined below is a very simple and brief summary of each states plan.
The state of California provides its working residents with a partial income replacement insurance plan that is mandated through the state and funded by employee payroll deductions. This plan is referred to as California State Disability Insurance (SDI). There are two main branches of benefits associated with the program.
The Disability Insurance Plan
Paid Family Leave
For purposes of this article - we will focus simply on the disability insurance portion of the plan. If a worker suffers a disability and is unable to work in their profession - either partially or totally - they can have their physician complete and submit a medical certification and they must submit the claim form within 49 days of their disability.
Here are the pertinent current plan details -
Benefits are paid on a weekly basis. Payments range from $50.00 to a maximum of $1,011.00. In order to earn the maximum level - a minimum annual income level of $96,000.00 is required.
You must be unable to complete the customary duties of your occupation due to disability for at least 8 consecutive days. If proper medical and claim paperwork is completed and filed - benefits will begin following that 8 day waiting period and continue for a maximum benefit period of 52 weeks.
Benefits are not taxable - they are only taxable if paid over workers compensation benefits. SDI benefits are not offset with private/individual plans or social security disability benefits. There are no recovery benefits associated with SDI. Upon return to full-time work, benefits will cease, regardless of existing income loss.
Enacted in 1969, the Hawaii Temporary Insurance Law (TDI), requires employers to provide partial wage replacement insurance coverage to their eligible employees who suffer a non work related injury or illness (including pregnancy). Funding for the insurance must be paid by employers and not the state. Company’s can either select a state approved insurance company plan or provide their own ‘self insurance’ sick leave plan that must be approved by the state.
Benefits are paid on a weekly basis. The benefit averages 58% of a person’s annual paid income from the employer - with a weekly benefit cap of $510.00. In other words, the most any person can receive from these plans is $510.00 a month.
You must be unable to perform the material and substantial duties of your occupation through the employer for a period of 8 consecutive days. The maximum period for benefits is 26 weeks. Benefits are taxable at the Federal & State level. There are no offsets from this coverage by individual plans or social security.
The New Jersey Temporary Benefits law provides working individuals within the state of New Jersey disability insurance for non-work related injuries and illnesses.
Plan has a 7 consecutive day waiting period. Once a person has been unable to work in their occupation for 8 consecutive days due to an injury or illness - they would be eligible for a disability benefit from the state.
The maximum benefit payout is 26 weeks. You receive 66.6 percent of your income with a maximum weekly benefit cap of $572. Benefits are taxable on the Federal Level and FICA.
The state of New York provides its employed residents disability insurance benefits for non work related illness or injury through the state insurance fund. This is separate from workers compensation protection. Benefits are paid on a weekly basis. Cost of this insurance is either fully paid by the employer or shared by both the employer and employee.
The plan has a 7 consecutive day waiting period. A person will be eligible if a disability prevents them from doing the material and substantial duties of their occupation for 8 consecutive days. The maximum benefit payout is 26 weeks and the maximum weekly benefit amount is $170.00. Benefits are taxable.
In 1942 the state of Rhode Island enacted the the Temporary Disability Insurance program (TDI) to provide benefit payments to workers who suffered an illness or injury preventing them from working. The plan is funded by Rhode Island workers.
To be eligible for a claim, a person must be unable to do work in their occupation due to an injury or illness for 7 consecutive days. The weekly benefit provided is 4.62% of the wages paid to the person in their highest quarter of their base period, which is the first 4 of the last five completed calendar quarters of earnings. The maximum weekly benefit paid is $719.00. Benefits are not taxable.
These are just some of the main components of each plan and should always be reviewed by visiting the corresponding state’s own website for updates and changes. The important aspect that should be taken is that for higher level employees and executives that earn high salaries - full dependence on these forms of protection will leave them in most cases, severely under insured for income protection. A proper individual or private company group plan should always be utilized to help ensure additional protection is provided.
Bill Olmsted holds a Financial Representative contract with The Guardian Life Insurance Company of America based out of New York, NY.
The information displayed on this page are the opinions and views of the author, and are not necessarily the opinions and views of The Guardian Life Insurance Company of America (Guardian), or any company that is an affiliate or subsidiary of Guardian.
This web page is provided for informational purposes only and should not be considered tax or legal advice. Please contact your tax or legal advisor regarding the tax treatment of the policy and policy benefits. You should consult with your own independent tax and legal advisors regarding your particular set of facts and circumstances. The information provided is not intended or written to be used, and cannot be relied upon, to avoid penalties imposed under the Internal Revenue Code or state and local tax law provisions.
2017-51657 Exp 12/19