The advantages of auto-enrolling employees in disability insurance
There’s a substantial gap between people who believe they need disability insurance and those who actually have it. What’s concerning is the likelihood that employed adults will need disability insurance at some point in their lives.
We have relied on communications during open enrollment to educate employees about the value of disability coverage, but what we often find is that employees steer clear of benefits they don’t want to need. They also may simply be overwhelmed by the number of choices they need to make, or may not review their benefits at all and just keep the selections they made the previous year(s).
The recent letter of clarification issued by the DOL explains that employers covered under ERISA may automatically enroll workers into group disability income insurance plans, similar to the auto-enrollment process for 401(k)s. While many workers may question why they are being enrolled automatically, it's encouraging and reassuring having your employer say, “this is an important coverage that you should have. If you don’t want it, you can opt out.”
Sun Life recently surveyed brokers, employers and employees about the benefits of automatically enrolling employees into disability plans. Respondents used words like ease, safety net, and worry-free. Brokers and employers alike agreed that auto-enroll protects employees who don’t always realize they need protection — but are glad they have it when they need it.
Auto-enrollment means people can rely on disability coverage without having to think about it during enrollment season. Should an employee encounter a major health event that requires leave from work, they also get, in addition to income replacement, the support services affiliated with disability insurance, including support from interdisciplinary teams, including vocational rehabilitation/retraining to create individualized action plans to return an employee to work, health and productivity.
Disability insurance replaces income and provides a financial cushion during a time of upheaval in a person’s life. According to the Council on Disability Awareness, one in four working Americans will miss up to three months of work due to illness, injury or pregnancy/maternity leave during their career. The Federal Reserve says that most Americans do not have enough savings to cover three months of living expenses, and nearly half of consumers today say they could not pay an unexpected bill of $400. To put it simply, even a short term leave of absence could leave many families with a hefty financial burden — which can impact mental and even physical health, potentially slowing recovery and increasing leave duration.
Disability is not just income insurance, it covers the process by which someone can receive the help and support they need to recover and come out the other side to return to work. This can including vocational training for a different position, behavioral health analysis, clinical consulting, workplace accommodations and treatment.
Perception vs. reality
Although considered a valuable coverage, people are woefully underinsured when it comes to disability. There’s a substantial gap between those who believe they need disability insurance and those who actually have it. In a recent Sun Life survey, of the 35% of employee respondents who do not currently have disability coverage, 76% say they believe the benefit has value. A recent LIMRA survey showed that while 48% of respondents felt they personally needed the benefit, only 20% actually had it. A common misconception is the ease with which someone might obtain federal disability or social security support — only about 35% of applicants receive benefits, and the appeals process can take years.
Although auto-enrollment is not a new concept, it’s not as common with disability and so employees will need in-depth, strategic communications to ensure they understand what they’re getting and why it’s a valuable asset to their financial security. Feedback from brokers, employers and employees in Sun Life’s recent survey showed that auto-enrollment fills a need of coverage regret, where employees realize too late and wished they had enrolled in the benefit.
A communications strategy should be mapped out for the year, not just at enrollment season. Once a strategy is determined, multiple, spaced out employee communications will help employees understand the process, learn more about the benefit and opt out if they choose.
Disability auto-enrollment provides a safety net to every employee, without the arduous steps within the enrollment process. It helps to reduce time spent on enrollment (particularly if using a benefits administration platform) and if communicated and rolled out effectively, can become an integral part of benefits enrollment strategy.