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AD&D, LTD and Group Life insurance rates and what is your co's policy on providing this coverage?

My company is changing insurance carriers for benefits and employee life and related insurance coverages. Our company has <20 employees and we are a software/internet company. I was quoted the following for prices as of 1/1/2011:

AD&D: $.03 per $1,000 of coverage
Group Life: $.16 per $1,000 of coverage
Long Term Disability (LTD): .27% of covered payroll (e.g. if we have $100K of payroll, this will cost us $270/month for teh whole company)

Are these rates competitive? They are from a major national carrier via our broker.

Secondly, do your companies provide any or all of this coverage? If so, do you pay or does the employee pay or do you share the cost? Do employees care about this?

Experience and suggestions are welcome.

Answers

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

I am in an interesting spot as my current company provides coverage for all of the above, and the employee simply counts the disability portion of the premiums paid on their behalf as part of their annual W-2 wages. This enables an employee to have use of the benefit if they become ill and only be taxed on the premium value and not the benefits as/if/when they get disbursed. For the small number of employees we have had use this benefit, they are our best support for this management of the benefits. My company also has fewer than 20 employees.

My experience at prior companies is that the firm was not interested in the added cost, and when offered to the employees to pay out of pocket we never got enough takers to allow us to move forward. Most people don't remember that medical insurance only covers the illness and treatment (after you have emptied your pockets from all the out of pockets and deductibles). No one is looking after you when you run out of income following use of all available sick and vacation days.

I am going to ask for our renewal pamphlet to be pulled, so I can't comment on the rates at the moment. However, make sure to understand what the benefits are and their limits when looking at the costs. We were with Unum until a few years ago when we switched to Lincoln National. This year we had the option to save a little money through another carrier, but determined the coverage was much more limited in the event someone needed to use it.

George Schaefer
Title: CFO
Company: Soltage, LLC
(CFO, Soltage, LLC) |

I have worked for three clean tech start up in the past 5 years - none were cash flow positive - so as a result we did not offer any of these benefits to our employees.

Dan Jebens
Title: CFO
Company: ToolWatch Corp
(CFO, ToolWatch Corp) |

We too are a small <20 employee software company and have offered Life/LTD/ADD benefits even when we weren't cash flowing. LTD insurance is one of the most important coverages for people to have, yet far less people carry it than life insurance. The cost for the company to carry it is ridiculously small to what most employees will pay for it on their own. I can't remember the actual stat but your are something like 3 times more likely to become disabled than die before 65.

We pay the entire premium and allow the employees to make an election under Rev Ruling 2004-55 to have the LTD premiums treated as pretax. Our LTD rates are .0023 times the monthly base salary and the benefit is 60% of the base salary. So someone making $100,000 a year costs $19.18 per month to have $60,000/yr of benefit. The benefits would be taxable to the employee unless the election is made to have the premium taxed on their payroll (in the case above $19.18 is taxed so about $8 in tax/month makes the benefits non-taxable). So an employee who makes the election will end up pretty close to a full after tax paycheck for their LTD benefit and not have to pay any taxes on the benefits. You have to make sure the insurance company sets up the LTD to have the 2004-55 option.

We offer 15k in life and 15k ADD. Our life rates came in at .2093/1000 in coverage per month and ADD was .0253/1000.

We use Principal Life who also does our Dental coverage so the incremental admin is small. Hope this helps.

It is a great benefit even if few people realize it.

Jeff Taylor
Title: CFO
Company: Communications Co.
(CFO, Communications Co.) |

VERY helpful comments. Thank you Sara, George and Dan. Keep 'em coming, but just wanted to thank you.

Julie Church
Title: Controller
Company: Latis Networks, Inc.
(Controller, Latis Networks, Inc. ) |

Jeff, I think those rates seem competitive. They are companrable to what we pay (except life- ours is rated based on ages and we may have an older group). We are also a software company, under 100 employees, and we provide basic life, AD&D and LTD to employees. We find that providing these benefits to all employees provides them with important benefits (that they might not choose on their own) and keeps uour company competitive in the market place for recruiting new talent.

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