SHRM Survey Findings: 2013 Employer Perspectives on Disability Benefits--Compensation and Buy-Up Coverage

SHRM Survey Findings: 2013 Employer Perspectives on
Disability Benefits—Compensation and Buy-Up Coverage
In collaboration with and commissioned by
MassMutual
September 18, 2013

In collaboration with and commissioned by MassMutual
• The 2013 Employer Perspectives on Disability Benefits survey, which was commissioned by
MassMutual, is a collaboration between the Society for Human Resource Management
and MassMutual.
• The survey was sent to a randomly selected sample of SHRM members from a variety of
industries. A response rate of 10% was achieved with 4,402 responses.
• The main purpose of this research was to gain a better understanding of organizations’
needs and gaps regarding long-term disability and executive benefits. The 2012 data were
collected from a sample including small-, medium- and large-staff-size organizations (see
slide 26).
• The findings are divided in the following topics:
 Base Group Long-Term Disability Plans
 Compensation and Buy-Up Coverage
 Supplemental Plan/Individual Disability Income
 Carrier Satisfaction/Changes
 Executive Group Life Benefits
2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM2013 2
Introduction

• The results of each question are reported by the overall sample, and then, where applicable,
statistically significant differences by organization staff size, industry and region are included. Only
statistically significant differences with a sample size of 25 or more were reported.
• The results are based on respondents who indicated that they were either “extremely
knowledgeable,” “very knowledgeable” or “somewhat knowledgeable” about their
organization’s employee benefits plan. The results include respondents from publicly owned for-
profit or privately owned for-profit organizations only.
Introduction (continued)
Industries Organization Staff Size Region
 Accounting/architectural
 Computer and electronic
products/technology
 Energy, gas, oil
 Financial services
 Health care services
 Information services
 Law firms and legal services
 Manufacturing
 Pharmaceutical and medicine
 Physician and dental offices
 Professional, scientific and
technical services
 Telecommunications
 Utilities
 Wholesale and retail trade
 Other industries
 1 to 99 employees
 100 to 499 employees
 500 to 2,499 employees
 2,500 to 24,999 employees
 25,000 or more employees
 Midwest
 Northeast
 South
 West

Compensation and Buy-Up Coverage

• What percentage of organizations includes variable compensation in the income protected by
their long-term disability plan? Almost one quarter (22%) of organizations indicated variable
compensation is protected by their long-term disability plan. The law firms/legal services, financial
services and wholesale/retail trade industries were more likely to include variable compensation
in the income protected by their plan.
 Among organizations with a plan protecting variable compensation, 93% indicated the
compensation is protected at the same percentage as the base plan selection.
Organizations with 100 to 499 employees were more likely to report protecting variable
compensation at the same percentage as the base plan selection.
• Are organizations offering “buy-up” coverage through their group long-term disability program?
Overall, 21% of organizations indicated offering this coverage: 16% of organizations offered this
coverage to all employees, and 5% reported this coverage is provided to select employees.
 Among organizations that offer “buy-up” coverage, 77% reported that less than 50% of their
employees participate in this coverage.
• Are organizations concerned that their base long-term disability program does not fully cover
employees who have income in excess of the plan limit? Less than one-third (29%) of
organizations reported concern that employees with income in excess of the plan limit are not
covered. Slightly more than one-half (51%) of organizations indicated that their benefits provider
has discussed this with them.
Key Findings in Compensation and Buy-Up Coverage

• Are select employees being left underinsured with the organization’s long-term disability plan?
Currently only a small portion of organizations cover variable compensation (e.g., bonuses and
incentive pay) in their long-term disability plan. For employees, especially executives and
employees working on commission who rely heavily on such methods of compensation,
coverage under traditional long-term disability group plans may not be enough. HR professionals
may need to assess if alternative coverage plans should be offered to select employees who
may desire additional coverage.
What do these findings mean for HR professionals?

Is variable compensation, such as bonuses or commissions,
included in the income protected by your base long-term disability
plan?
Yes
No
22%
78%
Note: n = 3,243. Only respondents whose organizations offer a group long-term disability plan were asked this question. Respondents who answered
“don’t know” were excluded from this analysis.

Note: Only statistically significant differences are shown.
Still thinking about your base plan, is variable compensation, such
as bonuses or commissions, included in the income protected by
your base long-term disability plan?
Law firms/legal services, financial services and wholesale/retail trade are more likely than manufacturing;
professional, scientific and technical services; and energy, gas and oil industries to include variable
compensation in the income protected by their base long-term disability plan.
Comparison by organization demographics
Law firms and legal services (37%)
Financial services (33%)
Wholesale and retail trade (32%)
>
Manufacturing (14%)
Professional, scientific and technical services (14%)
Energy, gas, oil (13%)
Telecommunications (26%) > Manufacturing (14%)

Is this variable compensation protected at the same percentage
as the base plan selection?
Yes
No
93%
7%
Note: n = 617. Only respondents whose organizations offer a group long-term disability plan and include variable compensation in the income
protected by their base long-term disability plan were asked this question. Respondents who answered “don’t know” were excluded from this analysis.

Is this variable compensation protected at the same percentage
as the base plan selection?
Organizations with 100 to 499 employees are more likely than organizations with 2,500 or more employees to
protect variable compensation at the same percentage as the base plan selection.
100 to 499 employees (97%) >
2,500 to 24,999 employees (86%)
25,000 or more employees (86%)

What percentage of employees are “capped” by the maximum
monthly benefit amount of your group long-term disability base
plan?
Zero
1% to 9%
10% to 19%
20% to 29%
30% to 39%
40% to 49%
50% to 74%
75% to 99%
100%
10%
39%
18%
10%
6%
4%
6%
2%
4%
Note: n = 2,525. Only respondents whose organizations offer a group long-term disability plan were asked this question. Percentages do not total 100%
due to rounding. “Capped” indicates that employees earn more than the covered limit.

What percentage of employees are “capped” by the maximum
monthly benefit amount of your group long-term disability base
plan?
Organizations with 100 to 2,499 employees are more likely than organizations with 1 to 99 employees to “cap”
10% to 19% of employees by the maximum monthly benefit amount of their group long-term disability base
plan.
10% to 19%
100 to 499 employees (20%)
500 to 2,499 employees (21%)
> 1 to 99 employees (14%)

Do you offer “buy-up” coverage that is available through the
group long-term disability program to all employees, some
employees or none of your employees?
Not
offered
Offered to
all
employees
Offered to
some
employees
79%
16%
5%
Note: n = 3,332. Only respondents whose organizations offer a group long-term disability plan were asked this question. Respondents who answered
“don’t know” were excluded from this analysis. “Buy-up” coverage indicates that this program does not include any supplemental individual long-term
disability plans that the organization may offer.

Do you offer “buy-up” coverage that is available through the
group long-term disability program to all employees, some
employees or none of your employees?
Smaller staff-size organizations are more likely than larger organizations to not offer “buy-up” coverage to any
of their employees. Larger staff-size organizations are more likely than smaller organizations to offer “buy-up”
coverage to all employees. The energy, gas and oil industry is almost twice as likely as wholesale/retail trade to
offer “buy-up” coverage to all employees.
Organization Staff Size Organization Industry
Not offered
100 to 499 employees (86%) >
500 to 2,499 employees (77%)
2,500 to 24,999 employees (65%)
-
500 to 2,499 employees (77%) >
2,500 to 24,999 employees (65%)
2,500 to 24,999 employees (65%) >
Offered to all employees
500 to 2,499 employees (17%)
2,500 to 24,999 employees (27%)
25,000 or more employees (37%) >
Energy, gas, oil (25%) >
Wholesale and retail trade (13%)25,000 or more employees (37%) >
500 to 2,499 employees (17%)
2,500 to 24,999 employees (27%)
2,500 to 24,999 employees (27%) >
500 to 2,499 employees (17%)
Offered to some employees
25,000 or more employees (11%) >
500 to 2,499 employees (6%)
-

Approximately what percentage of employees participate in the
“buy-up” coverage available through the group long-term
disability program?
Less than
50%
50% to 59%
60% to 69%
70% to 74%
75% to 79%
80% to 99%
100%
77%
8%
5%
4%
2%
2%
2%
Note: n = 463. Only respondents whose organizations offer a group long-term disability plan and buy-up coverage were asked this question.
Respondents who answered “don’t know” were excluded from this analysis.

Approximately what percentage of employees participate in the
“buy-up” coverage available through the group long-term
disability program?
Organizations with 100 to 499 employees are more likely than organizations with 2,500 or more employees to
have less than 50% of their employees participate in the “buy-up” coverage available through the group long-
term disability program.
Less than 50% 100 to 499 employees (86%) >
2,500 to 24,999 employees (70%)

What percentage of base salary is replaced by the base plan
AND the buy-up amount combined?
Less than
50%
50% to 59%
60% to 69%
70% to 74%
75% to 79%
80% to 99%
100%
17%
6%
44%
13%
7%
5%
8%

What is the maximum benefit amount per month of your
combined base and “buy-up” coverage?
Less than $2,500
$2,500 to $4,999
$5,000 to $7,499
$7,500 to $9,999
$10,000 to
$14,999
$15,000 to
$19,999
$20,000 to
$24,999
$25,000 or more
6%
10%
14%
10%
28%
12%
8%
11%
Respondents who answered “don’t know” were excluded from this analysis. Percentages do not total 100% due to rounding.

Is the “buy-up” coverage paid for with . . . ?
Post-tax dollars
Pre-tax dollars
Option of either
pre-tax or post-
tax dollars
A combination
of pre-tax and
post-tax dollars
56%
36%
5%
3%

Is it a concern that your base long-term disability program doesn’t
fully cover employees who have income in excess of the group
base plan limits?
Yes
No
29%
71%
Note: n = 440. The only respondents asked this question were organizations that offer a group long-term disability plan and buy-up coverage, and the
percentage of employees “capped” by the maximum monthly benefit amount of the group long-term disability base plan is greater than 0%.

Has your benefits provider discussed with you that your base long-
term disability program doesn’t fully cover employees who have
income in excess of the group base plan limits?
Yes
No
51%
49%

Do you currently have plans to talk to your benefits provider
about your concerns?
Yes
No
22%
78%
Note: n = 199. The only respondents asked this question were organizations that offer a group long-term disability plan and buy-up coverage and that
have not discussed with their benefits provider that their base long-term disability program does not fully cover employees who have income in excess
of the group base plan limits. Respondents who answered “don’t know” were excluded from this analysis.

Demographics

Approximately what percentage of regular, full-time and part-
time employees are eligible for employee benefits at your
organization?
Less
than
25%
25% to
49%
50% to
59%
60% to
69%
70% to
79%
80% to
89%
90% to
99%
100%
Full-time
Employees
(n = 4,182)
1% 1% 1% 1% 2% 4% 12% 78%
Part-time
Employees
(n = 3,470)
66% 3% 5% 1% 2% 3% 4% 16%

Which of the following is closest to your job title?
Manager
Generalist
Director
Chief Human Resource Officer
Vice President
Administrator
Supervisor
Associate Director
Specialist
Associate Vice President
Senior Vice President
Analyst
Chief Executive Officer
President
Chief Human Capital Officer
Senior Executive Vice President
Executive Vice President
Other
32%
23%
19%
9%
6%
2%
1%
1%
1%
1%
1%
1%
0%
0%
0%
0%
0%
3%
n = 4,394

Demographics: Organization Staff Size
1 - 99
employees
100 - 499
employees
500 - 2,499
employees
2,500 - 24,999
employees
25,000 or
more
employees
25%
33%
18%
17%
7%
n = 4,382

Demographics: Organization Profit Status
Privately
owned for-
profit
Publicly
owned for-
profit
72%
28%
n = 4,402

Demographics: Organization Region
Midwest
South
West
Northeast
35%
26%
22%
17%
n = 4,106

Demographics: Organization Industry
Percentage
Manufacturing 16%
Wholesale and Retail Trade 14%
Financial Services A
10%
Professional, Scientific and Technical Services 8%
Energy, Gas, Oil B
6%
Telecommunications 6%
Accounting / Architectural C
4%
Computer and Electronic Products/Technology D
4%
Health Care Services E
4%
Utilities 4%
Information Services F
3%
Pharmaceutical and Medicine G
2%
Law Firms and Legal Services 2%
Physician and Dental Offices 1%
Other industries 16%
n = 4,402
A Includes Banks, Insurance Companies, Securities and Commodities, Other Finance and Insurance Services categories.
B Includes Energy Extraction and Refining, Gas and Oil, and Other Oil, Gas, and Energy Extraction and Refining categories.
C Includes Accounting, Tax, Payroll Services and Architectural, Engineering categories.
D In the survey labeled as Manufacturing: Computer and Electronic Products/Technology.
E Includes Hospitals and Other Health Care Services categories.
F Includes Publishing, Motion Picture, Broadcasting (except Internet) and Other Information Services categories.
G In the survey labeled as Manufacturing: Pharmaceutical and Medicine category.

U.S.-based operations only 66%
Multinational operations 34%
Single-unit organization: An organization
in which the location and the
organization are one and the same.
26%
Multi-unit organization: An organization
that has more than one location.
74%
Multi-unit headquarters determines HR
policies and practices
64%
Each work location determines HR policies
and practices
4%
A combination of both the work location
and the multi-unit headquarters determines
HR policies and practices
33%
Is your organization a single-unit organization or
a multi-unit organization?
For multi-unit organizations, are HR policies and
practices determined by the multi-unit
headquarters, by each work location or by both?
Does your organization have U.S.-
based operations (business units)
only, or does it operate
multinationally?
n = 4,387 n = 4,398
Note: n = 3,410. Percentages do not equal 100% due to rounding.
Corporate (companywide) 74%
Business unit/division 15%
Facility/location 11%
n = 3,407
What is the HR department/function for
which you responded throughout this
survey?
Demographics: Other

• Response rate = 10%
• 4,402 HR professional respondents from a randomly selected sample of a
variety of industries in SHRM’s membership
• Margin of error +/- 2%
• Survey fielded: July 10, 2012 to August 3, 2012
SHRM Survey Findings: 2013 Employer Perspectives on
Disability Benefits—Compensation and Buy-Up Coverage
Survey Methodology

32Disability and Executive Benefits Survey ©SHRM 2012
About MassMutual
Founded in 1851, MassMutual is a leading mutual life insurance company that is
run for the benefit of its members and participating policyholders. The company
has a long history of financial strength and strong performance, and although
dividends are not guaranteed, MassMutual has paid dividends to eligible
participating policyholders every year since the 1860s. With whole life insurance
as its foundation, MassMutual provides products to help meet the financial needs
of clients, such as life insurance, disability income insurance, long term care
insurance, retirement/401(k) plan services, and annuities. In addition, the
company’s strong and growing network of financial professionals helps clients
make good financial decisions for the long-term.

About SHRM
The Society for Human Resource Management (SHRM) is the world’s largest
association devoted to human resource management. Representing more than
250,000 members in over 140 countries, the Society serves the needs of HR
professionals and advances the interests of the HR profession. Founded in
1948, SHRM has more than 575 affiliated chapters within the United States and
subsidiary offices in China and India.

• For more survey/poll findings, visit www.shrm.org/surveys
• For more information about SHRM’s Customized Research Services, visit
www.shrm.org/customizedresearch
• Follow us on Twitter @SHRM_Research
About SHRM Research

SHRM Survey Findings: 2013 Employer Perspectives on Disability Benefits--Compensation and Buy-Up Coverage

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