Long-Term Disability Benefits for Financial Executives: What CFOs and Risk Officers Need to Know
Long-term disability (LTD) benefits can protect a financial executive’s pre-disability earnings when they develop a medical condition or suffer an injury that prevents them from working. However, the amount of LTD compensation they receive may be less than they expect. And chief financial officers, controllers, and senior risk officers frequently face challenges when filing for long-term disability benefits.
Often, these individuals have an employer-sponsored group insurance policy governed by the Employee Retirement Income Security Act (ERISA). These policies can cap monthly benefits. They may also exclude bonuses, commission, and equity pay from the earnings used to calculate the monthly benefit. Moreover, insurers examine high dollar claims more closely.
In this article, CCK Law will discuss:
- How insurance companies cap benefits, regardless of salary
- How certain types of pay may be excluded from LTD benefit calculations
- The strict deadlines that claimants must meet in ERISA-governed claims
- What happens when the definition of disability changes
How Do Long-Term Disability Benefits Work for Financial Executives?
Long-term disability benefits protect a percentage of a person’s pre-disability income. Typically, for group coverage, this percentage is around 60 percent, though this can vary from policy to policy. A person files for these benefits when they develop a medical condition (or suffer an injury) that prevents them from working.
Normally, an insurance company calculates the benefit off a worker’s pre-disability earnings. An insurer would multiply pre-disability earnings by the policy’s benefit percentage to calculate the gross monthly benefit. However, this gross benefit is typically subject to a maximum benefit amount, i.e., the monthly benefit cap.
For many salaried workers, this monthly cap will not matter. However, for high earners, like financial executives or risk managers, the cap often determines the actual benefit they will receive under the terms of their policies.
Watch CCK Law Partner Leah Small explain long-term disability claims for financial executives in this recent video:
Why Do Long-Term Disability Benefit Caps Create an Issue for Financial Executives?
Maximum benefit caps on long-term disability benefits create an issue for financial executives because they limit the payout no matter how high a salary is. While their benefit amount does not go down, the percentage of their pre-disability earnings they receive each month that is protected by their LTD policy does.
The monthly benefit cap varies greatly from policy to policy. Often, it falls in the range of $10,000 to $15,000 per month. Claimants should always read their insurance policy to find its maximum benefit amount. A policy with 60 percent coverage can pay out far less once the cap applies.
Consider this example: An executive earning $300,000 per year expects a gross benefit of near $15,000 under a 60 percent insurance policy. However, if the policy has a maximum benefit amount of $10,000 per month, then the executive would receive less than 60 percent of their gross income. What they actually receive would be closer to 40 percent of their pre-disability earnings.
| Annual Salary | 60 Percent Formula (Monthly) | Common Monthly Cap | Effective Replacement |
| $120,000 | $6,000 | $10,000 (cap not reached) | About 60 percent |
| $300,000 | $15,000 | $10,000 (capped) | About 40 percent |
The figures above are illustrative only and do not reflect the terms of any specific policy.
Additionally, many group policies define covered earnings as base salary only. This means that many financial executives, who may receive substantial bonuses or equity components, are receiving benefits that do not consider a sizeable amount of their earnings.
Financial executives should review how their insurance policy defines “covered earnings” before assuming the stated percentage reflects their real benefit. Offsets, such as Social Security disability payments, can lower the net payment even further.
What Is the Difference Between “Own Occupation” and “Any Occupation” Definitions of Disability?
There are two definitions of disability: “own occupation” and “any occupation.” Own occupation definitions ask whether a financial executive can still perform the duties of their specific job. Any occupation definitions ask whether a financial executive can perform the duties of any job whatsoever.
In many ERISA-governed policies, an own occupation standard is applied during the first 24 to 48 months of the claim. After this period, the definition changes to an any occupation definition. When this occurs, the insurance company reevaluates the claim and can terminate LTD benefits if it determines the claimant no longer meets the definition of disability. However, it is important to note that an insurance company can reevaluate your claim at any time.
Some any occupation definitions include a gainful component. This component requires that the alternative occupation pay a certain percentage of the claimant’s pre-disability earnings — typically around 60 percent. Read CCK Law’s article on own occupation versus any occupation policies for a fuller explanation of how this standard works.
This transition from one standard to another is often a point of dispute. For example, a cognitive impairment that prevents a person from serving as a chief financial officer might not, in their insurer’s eyes, prevent them from performing a less-demanding sedentary position. Moreover, this transition occurs on a set schedule, regardless of whether the claimant’s medical condition has changed.
Watch CCK Law’s Mason Waring and Leah Small explain what the any occupation definition of disability means for long-term disability claimants:
What Medical Conditions Commonly Lead Financial Executives to File LTD Claims?
Many medical conditions can make it impossible for a financial executive to work. Common conditions include:
- Cardiac events, such as a heart attack
- Cognitive impairment
- Anxiety
- Depression
- Burn-out
Cardiac events can leave an executive unable to perform high-stress duties by order of their physician. This prevents them from returning to work safely.
Likewise, cognitive impairments can affect a financial executive’s sustained focus, memory, and decision-making skills that their jobs require.
Mental health conditions are common due to sustained, high-stakes responsibility in senior finance roles. These conditions, like anxiety or depression, can be just as disabling as a physical injury; but insurance companies often examine these claims more due to their subjective nature.
Why Do Insurance Companies Scrutinize LTD Claims from Financial Executives?
Insurance companies closely examine LTD claims from financial executives because the higher monthly benefit represents a greater financial strain to the company over the life of the claim. In other words, insurers, if they approve such claims, must pay more to these workers than others.
An insurance policy that pays several thousand dollars or more per month represents a significant liability for an insurer. Therefore, insurance companies are more likely to use surveillance tactics and independent medical exams to help justify a denial of these claims and appeals.
What Should a Financial Executive Do If an LTD Claim Is Denied?
A financial executive who receives a denial of their long-term disability claim should request a copy of their claim file from their insurer. They are entitled to this claim file for free under ERISA, but they must request it — an insurance company will not automatically give it to them.
Financial executives should also:
- Read the denial letter — The denial letter will include the specific reasons the insurance company had for denying the claim.
- Note the appeal deadline — Under ERISA, you typically have 180 days to file an appeal. If you miss this deadline, your appeal will likely be denied.
- Gather additional evidence — Additional medical evidence, functional testing, witness statements, and other evidence can strengthen a claim and refute the reasons for the denial as listed in the denial letter.
- Consider talking with an attorney — Filing for and/or appealing long-term disability benefits is not something you must do alone. Having an attorney to help you can help you avoid missteps that often lead to denials.
Under ERISA, the administrative appeal stage is often the last time you may submit evidence on the record. If your appeal were to be denied, and your claim goes to court, often no new evidence could be submitted to prove your case. Thus, having an attorney can help you build a strong appeal with the right evidence, should your case go to court.
Watch CCK Law’s Leah Small discuss why your denial letter is an important part of your LTD appeal:
Frequently Asked Questions
How long do long-term disability benefits last for financial executives?
Long-term disability benefits last until the claimant reaches the end of the policy’s maximum benefit period, returns to work, or no longer meets the applicable definition of disability — whichever occurs first. For more information, read our article “How Long Can You Stay on Long-Term Disability.”
Why should I submit a detailed job description as part of my LTD claim?
Insurers may describe your job duties more broadly than they are. An insurer might classify a chief financial officer simply as a general “manager” to argue the individual can still work. A detailed job description and vocational evidence can counter this kind of mischaracterization.
Can I keep my long-term disability benefits if I work part time?
It depends on the terms of your long-term disability policy. Some may not allow you to work at all and still receive benefits; some insurance policies reduce LTD benefits for part-time work; and others may end benefits all together once your income reaches a set level. It is always best to read your policy to know what you can and cannot do.
Does Social Security Disability Insurance affect my LTD benefits?
Most group LTD policies contain Social Security Disability Insurance offsets, which reduce the amount of monthly LTD benefits you may receive. Moreover, most insurance companies require you to file for SSDI benefits to receive LTD benefits. See CCK Law’s explanation of offsets for more details.
CCK Law May Be Able to Help
If you need help with your long-term disability claim or appeal, then CCK Law may be able to help. Since 1999, we’ve been helping claimants get the benefits they were eligible for under the terms of their policies — though past results do not guarantee future outcomes.
You can call us at (800) 544-9144 or fill out an online form for a free case evaluation. A member of our team will analyze your claim and determine if we can assist.
