The Hidden Value of Social Security Disability Insurance: Why It’s Important During Benefits Enrollment
By Diane Russell, Lincoln Financial
Your company’s benefit package is sending you a message about their priorities — and whether they are the same as yours. When companies get it right, it pays off in terms of your job satisfaction and desire to continue to work there. That’s because your employer is making it clear they are listening — and responding — to what you and your colleagues are saying you want and need the most.
What employees are concerned about
How can you effectively prioritize the value of your various benefits? The first step is to consider your own financial needs and goals, as well as your stage of life. Do you have a family? Are you their main source of income? Are you prepared if an illness or injury keeps you out of work for a period of time? When do you plan to retire?
In addition to your own specific needs, also consider the overall issues faced by today’s employees and how those issues may affect your benefit choices and work performance. We live in a time when financial stress is increasing, and health care is a significant contributor to that stress. In fact, 46 percent of employees fear unforeseen health expenses more than any other concern.1 And that financial stress can impact employees’ health care decisions: In a 2016 study, nearly 80 percent of emergency room physicians reported treating patients who have health insurance but nevertheless chose to delay or even forgo medical care due to costs.2 When employees do decide to seek the medical care they need, many may have to make difficult decisions about where that money will come from.
One notable trend shows that many Americans are funding everyday expenses by dipping into their retirement savings. In fact, 44 percent of workers surveyed said they’d most likely use money from their retirement accounts for expenses other than retirement, with 30 percent having already made one such withdrawal. 3 The top reason workers withdraw money from their retirement account is out-of-pocket medical expenses, with 28 percent of those surveyed withdrawing money for that reason. 4
Not surprisingly, 42 percent of American workers are concerned about running out of money in retirement.5
Benefits make a difference
Employee benefits can help relieve financial stress. They are an important part of your total compensation package and can significantly influence the decision to stay at your current job or seek a new position.
57 percent of job candidates report benefits and perks are among their top considerations before accepting a job.
Nearly 80 percent of workers would prefer new or additional benefits to a pay increase.
What employees value
What benefits do your colleagues value and prioritize when it comes to choosing or staying with an employer? A recent Glassdoor Economic Research employee study shows there’s a clearly defined hierarchy. The study ranked 54 benefits by how much correlation they had with overall satisfaction with benefit packages — and the core benefits of health insurance, paid leave and retirement (including pensions and 401K plans) were all in the top five. These benefits, along with disability coverage, are the ones that can really make a difference to your financial security and future.
That’s because health benefits can be a prime protection against financial pitfalls such as high deductibles and coinsurance, as well as the loss of income that often comes with a prolonged recovery. Employees agree that this kind of protection can strongly contribute to a feeling of financial control and well-being, and view health insurance (97 percent) and disability insurance (93 percent) as important sources of protection and security for their families. They not only value this coverage, they expect employers to offer it, with two out of three employees expecting employers to provide disability insurance.8
Interconnected benefit solutions
These three key benefit areas — health insurance, retirement, and disability — are interconnected. They serve as the legs of a three-legged stool when it comes to financial wellness. If one leg is taken away, or is inadequate, the whole stool may collapse.
As we’ve noted, many workers will turn to their retirement accounts to pay for out-of-pocket medical expenses. Another reason for withdrawals is when they are out of work for a prolonged period due to a serious illness or injury. Your most important financial resource, after all, is your ability to earn an income. If your health insurance or disability coverages are inadequate, and you need to take out a 401K loan to pay medical expenses, the impact won’t just be on today’s finances, but also your long-term financial outlook.
How can your employer help?
Employers need to reach out to their employees — and truly listen to and incorporate their responses when choosing the tactics and tools that will become part of their financial wellness offerings. They need to recognize the importance employees place on the three-legged stool of health insurance, retirement and disability, and provide you with the information you need to thoroughly weigh your benefit options and make informed decisions.
Optimally, this could include providing concrete examples of how everyday health occurrences can affect your current and future financial picture, and how the benefits you are offered can help you reach your financial goals. Here are some questions you might want to consider and talk to your employer about:
1. Are you signing up for the same benefits every year because they are the best options — or because it’s what you’re used to?
When it comes to benefits through work, 87 percent of employees say they are more likely to enroll in benefits they are familiar with and are educated about.9 Although that’s understandable, that may mean you could be missing out on valuable benefits. Be sure to look at your employer’s full range of benefit options — not just the ones you already know well.
2. Have you had a major change in your life that could affect your benefit needs?
This is another aspect of not just doing what you’re used to – if you’ve recently gotten married, divorced, had a baby, or gotten a significant raise, your benefit needs and beneficiaries may need another close look.
3. Health insurance may pay most of your medical bills, but can you also take advantage of other options that protect you against loss of income during an illness or injury? Although 51 percent of employees say they have a plan in place for their financial future, only 26 percent have insurance that will cover them in case they can’t work due to illness or injury.10 Remember, using your retirement savings is a short-term solution with long-term negative results.
4. What will your out-of-pocket costs be — co-pays, deductibles, higher costs for out-of-network providers?
It may not be possible to know exactly what your expenses will be, but consider the possibilities and investigate whether there are coverages such as accident and critical illness that offer cash payments to help fill in the gap.
5. Are you taking full advantage of your company’s retirement match program?
Many companies offer a percentage match up to a certain contribution amount. Don’t leave free money on the table — make sure you’re contributing, at the minimum, enough to get your full company match.
6. Is your company’s benefit program on par with other companies in your industry?
Don’t compare apples to oranges — not every industry offers the same level of benefits. It’s important to have a sense of what the is norm in your industry and if your company meets or even beats it.
Conclusion
The benefits companies provide and the efforts they make to assure their employees are fully informed about their choices offer a view into how much a company values its employees. Companies that are truly trying to attract and retain talented employees listen to what their employees are saying, and know the triumvirate of key benefit solutions — health insurance, retirement, and disability — can make a crucial difference.
Sources
1 Lincoln Financial Group, “2017 Financial Focus Study.”
2 Brooke Murphy, “96% of Patients Don’t Understand Their Emergency Insurance Coverage: 6 findings from the ACEP,” Becker’s Hospital Review, https://www.beckershospitalreview.com/payer-issues/96-of-patients-don-t-understand-their-emergency-insurance-coverage-6- findings-from-the-acep.html, May 9, 2016.
3 PwC, “Employee Financial Wellness Survey,” https://www.pwc.com/us/en/industries/private-company-services/library/financial-well-being-retirement-survey.html, October 2018.
4 Transamerica Center for Retirement Studies. 2015 16th Annual Transamerica Retirement Survey.
5 See footnote 3.
6 Harris Poll for Glassdoor, December, 2015.
7 Glassdoor Employment Confidence Survey, October 2015.
8 Lincoln Financial Group “2017 Employee Benefits Study.”
9 See footnote 8.
10 See footnote 8.
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