Long Term Disability Calculation FAQs

OVERVIEW

Long Term Disability (LTD) offers employees continued salary payments after Short Term Disability benefits are exhausted. The payments are generally a percentage of the employee's salary. This guide answers some common questions on how LTD is calculated in Namely.

FREQUENTLY ASKED QUESTIONS

What are "minimum" and "maximum"?

The minimum and maximum represent the lowest and the highest monthly salaries that will be covered (not the minimum and maximum benefit amount.) The amount within this range that will be the basis for the employee's benefit is called the covered payroll amount, or Monthly Covered Payroll.  For example, if you make $12,000/month, and your plan has a maximum of $10,000, your Monthly Covered Payroll amount will be $10,000 - but, depending on your plan's benefit (e.g., "50% of eligible salary"), your benefit amount may be lower; in the case of this example, $5,000.

Why is the Monthly Covered Payroll amount used in the Enrollment Wizard instead of the benefit volume?

Monthly Covered Payroll is shown in the Wizard because the premium carrier's charge is actually based on the employee's Monthly Covered Payroll.  For this reason, the Namely Enrollment Wizard displays covered payroll so that the appropriate premium is calculated and will appear on an employee's profile.

Why is the rate in the ben admin set up different than the rate that was provided during implementation?

In most cases, carriers provide a monthly rate for Long Term Disability based on cost per $100 of coverage; however, Namely calculates rates per $1000. The rate you'll see in Namely moves the decimal place over one spot form the rate provided. Our system will make these calculations automatically once you enter in the per $100 rate. For example, if the rate provided is $0.19 per $100, our system will translate that to be $1.90 per $1000 so that the premium calculates correctly.

How can I calculate an individual's covered payroll and premium?

Using the example of an employee making $70,000 per year with a policy percentage of 60% and a rate of $1.90 per $1000, you would:

  1. Take $70,000, and divide by 12 to get a monthly covered payroll of $5833.33.

  2. Then, to get the premium, take (5833.33/1000)*1.9 to get a monthly rate of $11.08.