A large publicly traded corporation had a disability plan with a common problem: While their disability coverage worked well for employees, it didn’t replace the same percentage of income for its executives. Employees out on disability were experiencing 60% income replacement, while executives were only averaging a 25% income replacement on disability.
The company sought to replace the same percentage of income for its executives that it was replacing for its employees. This is often difficult because executive compensation is complex equation of salary, bonus, and stock awards (equity) that cannot be protected by traditional disability coverage.
Considering this shortfall is important. For a corporation, attracting top talent in a highly competitive industry is a difficult endeavor. The retention and protection of the executive is essential to their success.
For the executive, if they go out on disability, they would be making about a quater or less of the income that they are accustomed to earning. This could have an immediate and extreme effect on their family and their lifestyle.
In meetings with the corporation, TWG brought their signature consultative approach. By getting to know the company culture and the executive team, TWG was able to gather insights that helped them solve for the best outcome.
Increasing the percentage of income covered for executives would best be achieved by building on the company’s current coverage. TWG designed additional High-limit Long-term Disability Insurance with guaranteed issue that allowed the corporation to reach its coverage goal.
TWG’s innovative solution allowed an additional $37,500 per month ($450,000 annually) in coverage for executives on disability.
Through implementing TWG’s innovative and cost-effective solution, the corporation gained a competitive advantage in the marketplace, as a restoration plan that considers salary, bonus, and restricted stock awards are not offered by other corporations. And, the executives and their families are better protected in the case of a disability.