Company Life Insurance

[tmasters]

I have a question about company paid life insurance.

I'm still working. I work for a great company with a super benefits package including LTD that will pay 80% of my salary when I can no longer work.

They also pay for term Life Insurance with a benefit amount of 2x my annual salary. Yesterday I asked the HR rep about the premiums I would have to pay after I leave the company on disability. She said the rate would be determined by my health status at that time, and there is no cap on the premium amount! So I expect they will price me out of continuing.

Disappointing, as I was hoping my wife would get some benefit from this. Does this sound right to all of you? I guess these company paid insurance policies really only cover sudden death due to stroke, heart attack, accidents, etc.

Tom

 

[asantiago]

Is there any possible way to maintain employment status with them? If you were to file Short Term Disability initially would that maintain your employment with them? And once that is up file for FMLA? Then file for Long Term. That could give you up to 1 year and 3 months I think. You might benefit from speaking to an employment attorney who would have an idea if there were any way around it.

 

[halfin]

Hi Tom - I have just been looking into this the past few weeks as well. The news I got was much better. Basically they said the life insurance premiums would be suspended while I was on disability (we also have LTD, not quite as generous, pays 60% but that will still be very good). The HR rep interpreted this to mean that I would basically have life insurance as long as the LTD lasts, without having to pay for it. The LTD should last until age 65, which is 12 years for me. She said this would all be true even after the company terminates me, as long as I am on LTD at the time of termination. I would keep my LTD and the life insurance would stay in effect without any premiums being due.

BTW the way our LTD works, either the company pays the premiums or the employee does. If it is the employee, then when you go on disability, the income is tax free; but if the company pays the premiums, the money is taxed. I think this is an IRS rule. They advised me to switch to paying the LTD premiums myself (they are not too expensive) and this way, when I go on disability my 60% of salary will be untaxed, making it more like 80% or so (haven't worked the math in detail). HR is being super helpful, I just hope all the info I am getting is correct.

 

[halfin]

One other idea I had, if you can't keep the life insurance. Many policies allow you to receive some fraction of the benefit if you have less than a year to live. Given the inherent uncertainty and risk of ALS progression, you could hopefully find a doctor to write you such a determination. Then you could receive some of your life insurance benefits before you quit. As I understand it, one is under no obligation to drop dead 12 months later! You can keep the money regardless. So I would definitely look into this as an alternative, if your policy allows it.

 

[tmasters]

Wow what great responses, thanks!

So I've been doing a little digging and my HR rep gave me some bad data on the Life Insurance. I got hold of the actual plan documents and it states similar to your situation Hal-- as long as I'm disabled until age 65 the life insurance premiums are suspended and I'm still covered. So that's great news! And for me, 65 is also 12 years away.

What a great idea about paying my own LTD premiums. I've got a question into my tax person about that, I'm wondering for how long do I have to be paying? One day, 1 month, 1 year, etc.

I wish my HR departement was as helpful as yours. I wonder if there are private services, consultants, or tax attorneys or whatever that specialize in providing this information. I would gladly pay a service rather than make an expensive mistake.

Thanks again,
Tom

 

[Zaphoon]

Hey, I'm 12 years away from 65, too!

 

[hopingforcure]

Tom, I was hoping that was the case. Sure seems to me that people just get info messed up often and therefore is not presented correctly. So glad you two were able to connect and get the info figured out. I must say you both are guys who I have the utmost respect for, and assume you both are amazing employees and co-workers.

 

[Erica]

Tmasters,
I don't know much about the Life insurance; on the LTD: I just converted the policy to pay my own premiums, so payable benefit would be untaxable. I was given an option to pay annually, or monthly with a big surcharge. Since I was told that premiums will be prorated when actual claim submitted, I opted to pay annually.
I consulted with labor/disability attorney and that was one of advices provided to me.
My company doesn't provide the STD and my LTD has 3 mo waiting period.
Erica.

 

[joelc]

In Canada, when you leave a job you have the option of continuing to pay for the insurance and they can't refuse you. If you are on LTD they can't cancel it either.

 

[Micheline_h]

I was going to say the same thing as Hal...and Joel great info

 

[daisy7386]

nice discussion thanx for posting . i too have this same problem
keep posting

 

[pvale]

I've got to say that the LTD insurance the company has (AIG), has been a godsend for me.
Benefits from that start this month, and I just got notification that my SSDI benefits start in February. Just make sure that you notify the LTD company when you do receive SSDI benefits, as they'll only pay over the SSDI benefit up to your 60% amount. This is very important, if they find later you've been getting full benefits from them, AND SSDI, they'll want refunded for the excess......

Perry

 

[Katie C]

Glen's company is the same way... he's on short term disability for 26 weeks, then it switches to long term. Company will pay his life insurance premium until age 65, then we take over the payments. He has 8 years to age 65, and I would be THRILLED to have to take over that payment! Also, the way the disability insurance works is that we file for state disability, then the company pays the difference between SDI and what his salary was while working.

 

[tmasters]

Just to follow up on this:

My tax person confirmed basically what you said Hal. But it turns out my company's disability benefits do not include the option for me to pay the LTD premiums. And they won't or can't make an exception. But I did suggest to them that they include an Amended Plan for next year's open enrollment. We'll see.

There is an IRS rule # 2004-55 that covers this, in case anyone is interested. You can just google "2004-55".

-Tom

 

[halfin]

That's too bad they won't do that, Tom. It's kind of surprising because it should save them money. You'd be paying your LTD premiums instead of them. Maybe they are worried that it is more paperwork to have the option available.