Before we begin, I’d like to cover a few housekeeping items. You’ll find handouts available in the top right-hand corner of your screen. Today’s course is a two-hour continuing education (CE) session, and we’re fortunate to have Rocco with us. He’s an Employee Benefits Representative from Mutual of Omaha, and he’ll be walking us through the topic of long-term disability. I hope you find this session informative and helpful. With that, I’ll turn it over to Rocco.

Thank you so much, Elise. Hello again, everyone. My name is Rocco, and I’m with Mutual of Omaha. Thank you for taking the time to join us today. I know we have attendees with varying levels of experience—some of you may be new to the industry, while others have been working in this space for several years. No matter where you are in your experience, this course is designed to provide a solid foundation in understanding long-term disability coverage. Some of the information might be familiar, but there will be key details and nuances that I hope will provide new insights or serve as a helpful refresher.

As Elise mentioned, this is a two-hour, two-credit CE course. I don’t expect the session to take the full two hours, but I do want to point out that in order to receive your CE credits, you must complete the sign-in sheet, which is available in the handout section. Be sure to include your name, signature, and the time attended, which should reflect 11:00 AM to 1:00 PM.

During this course, we’ll cover the basics of long-term disability coverage, including how eligibility is determined, how claims are qualified, the structure of elimination periods, how benefit durations are set, and how benefits are calculated. We’ll also explore some of the more detailed provisions surrounding these areas.

To begin, long-term disability insurance is essentially income replacement. It protects an individual’s ability to earn a paycheck in the event that they become disabled due to an illness or injury. Once the elimination period has been satisfied, the employee receives a monthly benefit. In most cases, that benefit equals 60% of their regular income, although you may also see variations such as 66 and two-thirds percent, 50%, or even 40%. However, 60% is by far the most common.

Before we go further, I want to mention that this session will be interactive. If questions come up as we go through the material, please feel free to ask them in real time rather than waiting until the end. It’s usually most effective to address questions while the topic is still fresh in your mind.

Now, let’s talk about how someone becomes eligible for long-term disability coverage. Eligibility depends on several factors. First, each employer defines what constitutes an eligible employee, including the minimum number of hours that must be worked per week. Second, there’s often a waiting period for new hires before they become eligible for coverage. That waiting period is typically defined as the first of the month following 30, 60, or 90 days of active employment. Eligibility may also depend on whether the claim is related to a pre-existing condition, and on how the employer defines “actively at work,” which again ties into the minimum work hours required weekly, monthly, or quarterly.

Employers may also create different employee classes within their organization. For instance, they might provide employer-paid long-term disability benefits only to executives or to employees who work more than 40 hours per week. Other classes of employees may not receive coverage at all, or they may only have access to a voluntary LTD plan. In short, eligibility hinges on whether the employee falls into a class defined by the employer, meets the minimum hour requirements, satisfies any applicable waiting period, and is actively at work under the definition set by the employer.

Waiting periods for new hires are customizable by the employer. Some plans allow new hires to be covered on their date of hire, while others may require a 30-, 60-, or 90-day waiting period before benefits become available.

Next, let’s talk about pre-existing conditions. The most common limitation for pre-existing conditions is referred to as a “3/12.” The first number, three, represents the look-back period, and the second number, twelve, refers to the amount of time the employee must be covered under the plan before the condition will be covered. Specifically, if an employee received medical treatment or was prescribed medication for a condition within the three months prior to their effective date, they will not be eligible to file a claim for that condition until they’ve been covered under the plan for twelve months.

There is an enhancement that some plans offer, which includes a “treatment-free” clause. This allows an employee to bypass the twelve-month requirement if they have gone three consecutive months without receiving treatment or prescriptions for that condition. If they meet that treatment-free window, the pre-existing condition exclusion no longer applies, and they can file a claim even if they haven’t yet reached twelve months of coverage.

One frequently asked question is what happens to the pre-existing condition clause when an employer switches insurance carriers. If the employee already satisfied the pre-existing condition period with the previous carrier, they do not have to restart it under the new one. Coverage continues on a “no loss, no gain” basis, meaning the time already served carries over to the new plan.

Another common question we get involves the “actively at work” provision. To be clear, this does not take away someone’s coverage; it simply determines which carrier is responsible for a claim. This leads us to what we call the “golden rule” of disability insurance: the carrier in place on the date of disability is responsible for managing the entire claim—even if the employer later changes insurance carriers. So, if an employee becomes disabled while covered under Carrier A, Carrier A will handle the claim, even if the group later moves to Carrier B. This rule applies across all carriers and ensures consistency in how claims are handled.

Now let’s shift to how someone qualifies for a claim and what they can expect in terms of benefits. Employees often ask whether specific situations—like a car accident or an injury on the job—would be covered under long-term disability. The answer isn’t based on the nature of the incident, but rather on whether the individual meets the plan’s definition of disability.

Unlike short-term disability, which usually has separate elimination periods for injury and illness, long-term disability uses a single elimination period regardless of the cause. After that elimination period is satisfied, the employee’s eligibility for benefits depends on the definition of disability set by the carrier.

The definition of disability is typically broken into two stages. The first stage is called the "Own Occupation" period, which usually covers the first 24 months of disability. During this time, the employee is considered disabled if they are unable to perform the substantial and material duties of their own occupation. After 24 months, the plan transitions to the "Any Occupation" period, during which the employee is considered disabled only if they are unable to perform the duties of any occupation for which they are reasonably suited, based on their training, education, and experience.

Some carriers include a “gainful occupation” clause in their definition of disability. This clause can make it more difficult for someone to remain eligible for benefits. For example, if a carrier determines that an employee could earn a certain level of income within twelve months of returning to work—even if they aren’t earning that income yet—they may no longer consider the employee disabled. This approach can feel unfair to employees. Mutual of Omaha does not include the gainful occupation clause in its definition, which is worth noting as a plan enhancement.

A common example used to explain this is the case of a CEO who becomes disabled. If that CEO cannot return to their specific role but could reasonably perform a similar executive role with another company, they would not be considered disabled under the "Any Occupation" definition. However, if the only alternative is a drastically different job—like flipping burgers—then that would not meet the standard, and the individual would remain eligible for disability benefits.

Another important factor in the definition of disability is the earnings test, which looks at how much income an employee must lose to qualify for benefits. The most common model is the 80/60 structure. During the initial Own Occupation period, the employee must experience a loss of at least 20% of their income. During the Any Occupation period, the required loss increases to 40%.

Other variations exist, such as an 80/80 model or a more generous 99/85 model. Under the 99/85 structure, the employee only needs to show a 1% income loss during the Own Occupation period and a 15% loss during the Any Occupation period to qualify. Mutual of Omaha uses the 99/85 model, while most other group carriers follow the more restrictive 80/60 definition.

That concludes the first section of our presentation, which focused on eligibility, plan structure, pre-existing conditions, and how disability is defined and evaluated. Let me know when you’re ready, and I’ll continue with the next part.

Let’s continue with our discussion about the definition of disability and how it’s applied in long-term disability insurance.

We just talked about the earnings test and how the higher the earnings test numbers, the easier it generally is to qualify for a claim. A more generous test, like a 99/85 model, makes it easier for an employee to meet the definition of disability based on income loss.

Another important definition you may come across is the “or” definition of disability. Over the years, this definition has evolved. Historically, in order to qualify for long-term disability benefits, an employee had to demonstrate both a loss of income and an inability to perform a certain number of material duties. Most carriers today still require some level of both—loss of earnings and duties—to approve a claim. However, to make their contracts appear more generous or liberal, some carriers now include the word “or” in their definition of disability.

At first glance, this “or” definition seems to suggest that a claimant would only need to meet one of the two criteria: either a loss of income or a loss of duties. But when you dig into the policy language, you’ll often find that it’s not that simple. In many cases, even with an “or” definition, the carrier might still require a significant income loss, along with at least a minimal loss of duties—or vice versa. So while the language appears more flexible, in practice, the requirements can still resemble a combination of both income and duties loss. That’s why it’s important to read the contract language carefully any time you encounter a policy that references this kind of definition.

To recap what we’ve discussed about how someone qualifies for benefits: the employee must suffer an injury or illness, meet the earnings test under both the “own occupation” and “any occupation” periods, and may also need to demonstrate a loss of material duties as defined by the policy. The higher the earnings test thresholds, the more generous the contract is considered to be. As for the “gainful occupation” clause, this is typically acceptable unless it’s misapplied by a carrier. One potential misuse of this clause is what’s sometimes referred to as the “crystal ball” provision—where a carrier projects that the claimant could return to work within 12 months, even if they’re currently meeting the definition of disability. In such a case, the carrier might deny or terminate a claim based on a speculative future outcome, even though the claimant is, at present, fully eligible under the policy’s definition. That’s why it’s crucial to understand how these clauses function.

At this point, we opened it up for questions. One of the questions asked was about the treatment-free clause in pre-existing condition limitations. Specifically, someone wanted an example of how being treatment-free for three months would override the typical 3-month look-back and 12-month coverage requirement under a 3/12 pre-ex definition.

Here’s how that works: Let’s say an employee is undergoing chemotherapy for cancer in the three months prior to the effective date of their long-term disability coverage. Their coverage becomes effective on January 1st. They continue treatment through February and March. In April, their doctor determines that treatment is no longer necessary—they’re responding well and can return to work full time. From that point forward, they stop treatment and aren’t taking any medication related to the cancer. If they remain completely treatment-free for three consecutive months—April, May, and June—then they’ve satisfied the treatment-free clause. Even though they’ve only been covered under the plan for five months total, they are no longer subject to the pre-existing condition exclusion for that cancer. If the cancer were to recur in the future, they would now be eligible to file a claim—even though the full 12 months of plan participation had not yet been completed.

Another question came in about whether an injury must occur on the job to qualify for long-term disability. It’s a good question and one that often comes up. The answer is no. Long-term disability provides 24-hour coverage—meaning it covers injuries and illnesses that happen both on and off the job. In contrast, short-term disability only covers off-the-job incidents. Anything that occurs while at work would typically fall under workers’ compensation. However, with long-term disability, whether the incident occurs during work hours or outside of work, the policy provides protection. If the individual is also receiving workers’ comp benefits, those would be offset against the LTD benefit, but the coverage still applies regardless of where the injury or illness occurred.

We also had a great question about a specific claim scenario: A dentist was unable to physically provide care but continued managing and supervising the practice for about three months until it closed. During that time, the practice generated no income. Would the dentist qualify for benefits, and if so, how much?

In this case, it depends on a few factors. First, whether or not the dentist meets the definition of disability in the contract. While he was technically still working, he wasn’t performing the substantial and material duties of his specific occupation—providing hands-on dental care. He was also not earning income from those duties. So, he does appear to meet the criteria for a loss of duties and earnings. Whether he qualifies would come down to how much income he lost compared to his pre-disability earnings, and whether the duties he continued performing are considered substantial under the terms of the contract. If he had at least a 20% loss of income (or 1% if the earnings test was more generous) and a loss of material duties, then yes, he would likely qualify for benefits. But again, it depends on the specific terms of the policy.

We then moved on to a question about how long a payment could last after starting a claim. That leads us right into the next topic: the elimination period—how long you have to be disabled before benefits begin.

The elimination period is the number of calendar days an employee must be disabled before long-term disability benefits become payable. The most common elimination periods are 90 days and 180 days. It begins on the date of disability, and the employee must remain disabled for that duration. However, there is a concept called trial work days that can affect how the elimination period is satisfied.

Trial work days allow a claimant to briefly return to work without resetting the elimination period clock. Here’s how that works: Let’s say someone with a 90-day elimination period goes out on disability due to cancer and begins chemotherapy. After two weeks, they return to work full-time and full duties for two weeks. Then they go back out for another round of chemo. Those initial two weeks count toward their elimination period. The two weeks they worked are considered trial work days and effectively put the elimination period on pause. When they go back out on disability, they pick up where they left off—now with 14 days already served.

Some contracts allow a specific number of trial work days, such as 14 or 30. If the claimant exceeds that number of days back at work, the elimination period resets entirely. However, some carriers—Mutual of Omaha included—offer a more flexible approach. If the elimination period is 90 days, the plan allows 90 trial work days as well. That means the employee could move in and out of work for up to 90 days without having to restart the elimination period. Essentially, the individual has up to 180 calendar days to complete their 90 days of required disability, allowing them to work intermittently without penalty.

For example, if the plan allows 30 trial work days and the claimant goes back to work full-time for 14 days, they still have 16 trial work days left. If they exceed the 30-day limit before satisfying the elimination period, they’d need to start over from day one. But if they stay under that threshold, the clock continues without interruption.

Next, we covered how the benefit amount is determined—something that sounds simple on the surface but includes a number of important components. These include the benefit percentage (typically 60%, but sometimes 66⅔%, 50%, or even 40%), the maximum monthly benefit, the definition of total disability, residual disability provisions, return-to-work or partial disability benefits, offsetting income sources, and the minimum benefit allowed.

For instance, if someone earns $60,000 per year and their long-term disability policy provides a 60% benefit, their monthly disability income would be based on 60% of their pre-disability earnings. However, other factors—such as offsets from Social Security or workers’ comp, partial return-to-work formulas, and policy caps—can affect the final amount received.

And that’s where we’ll pause before we dive deeper into how return-to-work benefits are calculated, and how offsets and minimums are handled.

To calculate the disability benefit, you would start by taking the individual’s annual earnings and dividing by 12 to find their monthly earnings. For example, if someone earns $60,000 annually, that would be $5,000 per month. Multiply that amount by 60%, and their monthly disability benefit would be $3,000.

In addition to the standard benefit calculation, every policy includes a maximum monthly benefit. When you're working with a new prospect or reviewing coverage for an existing client without current long-term disability insurance, determining an appropriate benefit plan starts with looking at the average income of the top five earners. All carriers and underwriters use this metric from both a benefit and risk standpoint. So, if the average income of those top five earners is $120,000, dividing that by 12 gives $10,000 per month, and 60% of that equals a $6,000 maximum monthly benefit. Therefore, even if the group includes employees earning as little as $25,000 or as much as $200,000, the plan would still cap at $6,000 if that’s the average for the top earners.

Now, let’s talk about the definition of total disability, which you’ll find in every group long-term disability policy. Simply put, if an individual earns less than 20% of their pre-disability income due to injury or illness, they are considered totally disabled and presumptively qualify for benefits. However, most real-world scenarios involve residual disability—more commonly known as partial disability. A person does not need to be completely unable to work in order to qualify for disability benefits. That’s where the earnings test we discussed earlier comes into play. Whether the threshold is 99%, 85%, 80%, or 60%, it essentially outlines how much income a person can still earn and still be considered disabled.

Residual or partial disability definitions allow employees to work part-time and earn part of their income—even during the elimination period—while still satisfying the criteria for disability. For instance, if a contract uses an 80% earnings test, and someone earns less than 20% of their pre-disability income, they are considered totally disabled. If they earn between 21% and 80%, they are considered residually or partially disabled. If they earn more than 80%, they are not considered disabled under that definition. In contrast, a 99% earnings test, such as the one used by Mutual of Omaha, requires only a 1% earnings loss to trigger eligibility for partial disability benefits.

This brings us to a critical provision: the Return to Work benefit, which determines how much and for how long an employee can receive partial disability payments while working part-time. Different carriers use different methods to calculate this benefit. Most policies offer full partial disability income for 12 to 24 months, meaning that the insurer won’t reduce the benefit unless the combination of part-time earnings and disability benefits exceeds 100% of the individual’s pre-disability income. For example, if someone earns 50% of their prior salary by working part-time and also receives 60% of their pre-disability income from the insurer, that totals 110%—which would be capped and reduced by 10% to avoid overpayment.

However, what happens after those 12 or 24 months varies by carrier and depends on the contract’s return to work formula. There are three main types: proportionate loss, 50% offset, and mutually progressive partial. The most common are the proportionate loss and 50% offset.

With the proportionate loss model, the benefit is reduced based on the percentage of income lost. For example, if someone earned $5,000 per month before becoming disabled and is now earning $2,000 working part-time, they have a 60% loss in earnings. Their standard benefit would be $3,000 (60% of $5,000), but because they are 60% disabled, their benefit is reduced by 60%, resulting in a $1,800 payment. Add that to their $2,000 part-time income, and they’re receiving a total of $3,800, or a 76% income replacement.

Under the 50% offset model, the insurer reduces the benefit by half of whatever the employee earns from part-time work. Using the same example, if the employee earns $2,000 from part-time work, the insurer reduces the $3,000 benefit by $1,000, resulting in a $2,000 payment. Combined with their part-time earnings, they receive $4,000 total—a slightly better income replacement at 80%.

The most favorable return-to-work provision is the mutually progressive partial, used by Mutual of Omaha. This approach allows claimants to continue receiving full disability benefits without any reduction as long as their combined part-time income and disability benefit do not exceed their pre-disability earnings—and this lasts for the full duration of the claim, not just the first 12 or 24 months. This means that employees who make the effort to return to work on a limited basis aren't penalized after a set period. It supports long-term recovery and rewards employees for trying to get back on the job.

Consider a real-world example: An employee diagnosed with multiple sclerosis pushes themselves to return to work in the mornings but still must stop around noon due to fatigue. For 12 months, they manage this schedule, maintaining part-time income while receiving a full disability benefit. If their carrier uses the 50% offset or proportionate loss model, their benefit could be reduced after that period, even though nothing has changed in their condition or work pattern. This can lead to confusion and frustration, with questions arising from employees, HR, and eventually the broker. With Mutual of Omaha’s mutually progressive partial definition, this reduction never happens—the benefit stays consistent for as long as they remain disabled and partially working.

Here’s a recap of the impact of these different methods: With a $3,000 benefit, the proportionate loss example results in $1,800 monthly. The 50% offset results in $2,000. But the mutually progressive partial keeps the full $3,000 monthly benefit intact, making it the most employee-friendly option.

Another factor in determining benefit amounts is other income offsets, which typically include Social Security Disability Insurance (SSDI), workers’ compensation, individual disability plans (if included as an offset), or third-party settlements. For example, say someone makes $5,000 a month, returns to work part-time and earns $2,000, and also receives $300 from Social Security. Using the proportionate loss formula, if their monthly benefit is reduced by $1,200 (due to their part-time earnings) and by an additional $300 from SSDI, their net disability benefit would be $1,500.

In some cases, these offsets could reduce a person’s disability benefit down to zero. However, minimum benefit clauses prevent this from happening completely. Even when all the offsets bring the standard benefit amount to zero, carriers typically still pay a minimum benefit—usually the greater of 10% of the gross benefit or $100 monthly. So even in heavily offset situations, the claimant will not receive $0 from the carrier.

Now, circling back to an earlier question: How long are benefits paid out? The length of time depends on the cause of the disability and the benefit duration selected in the plan design. In general, benefits are paid until the end of the designated benefit period—unless the individual is no longer disabled and able to return to work full-time before then. Plans may offer benefit durations like two years, five years, or to Social Security Normal Retirement Age (SSNRA), depending on what the group or employer has selected. We'll dive more into those benefit duration options in the upcoming slides.

Some types of disabilities come with limitations on how long benefits can be paid, even if the policy’s maximum benefit duration is longer. The most common long-term disability benefit duration is up to Social Security Normal Retirement Age (SSNRA). However, other plans may be written with shorter maximum durations, such as five years or two years. The five-year maximum is the second most common option, while the two-year maximum is the third most commonly offered. These durations are flexible and can vary between carriers and plans. The difference between the maximum benefit duration and the own occupation (own occ) period should be understood clearly. The max duration refers to the total length of time a person can potentially receive benefits. The own occ duration refers to how long the individual is considered disabled based on their own job duties before the definition changes to any occupation.

For instance, a standard policy might pay benefits up to SSNRA, but the own occupation definition might only apply for the first 24 months. After that, the policy would shift to the any occupation definition, meaning the person must be unable to work in any job that they are reasonably suited for based on education, training, or experience. An enhanced plan, often used as a carve-out for executives or key employees, may provide an own occupation definition for the full duration of the claim—often up to age 65. This means the more favorable own occupation standard never shifts, making it easier for individuals to qualify for ongoing benefits.

To comply with the Age Discrimination in Employment Act of 1967, plans also account for employees who become disabled after the age of 60. For individuals who become disabled before turning 60, the benefit duration goes straight to their SSNRA without modification. However, for those who are already over age 60 when they become disabled, the benefit period is scaled based on their age at the time of disability. For example, if someone becomes disabled at age 67—the same age as their SSNRA—they would still receive benefits for a limited time, such as one year and six months. Similarly, someone who becomes disabled at age 70 would still receive benefits, though only for one year. This ensures that older employees who are still working are not left uncovered or under-protected.

Certain conditions come with additional limitations, even when the maximum benefit duration is SSNRA or five years. Claims related to mental and nervous disorders, drug and alcohol use, and self-reported conditions are usually limited to a maximum of 24 months. These limitations exist because such conditions are harder to verify objectively, rely heavily on the claimant’s self-reporting, and have historically contributed to increased misuse and financial strain on LTD programs. To keep premiums affordable and ensure program sustainability, carriers have applied these standard limitations across the industry.

Most insurance carriers apply this 24-month limitation as a lifetime maximum. That means once an individual has received 24 months of benefits for one of these limited conditions, they are no longer eligible for any future benefits related to that type of claim—even if the condition resurfaces years later. In contrast, Mutual of Omaha applies this limitation on a per-occurrence basis. This means that if a person goes out on claim for a mental health condition, receives benefits for 24 months, and then returns to work, they can later go out again on a separate mental health claim and be eligible for a new 24-month benefit period. This offers greater flexibility and a more employee-friendly claims experience.

Another distinction is how carriers treat self-reported conditions or specific limitations. Conditions such as unverified back pain or migraines, which can’t be substantiated through medical imaging or lab tests, may be capped at 24 months by some carriers. However, Mutual of Omaha does not impose these specific limitations by default, setting them apart from many other carriers. While not all carriers include self-reported limitations, it is a fairly common practice in the industry.

There was a question during the session about how long this presentation was expected to last, and it was clarified that the presentation was duplicated in the slide deck, which initially caused confusion about the slide count. It was also noted that we were just past the halfway point in terms of content, but not in actual time required to complete the session.

To summarize when long-term disability benefits end: benefits stop when the employee is no longer disabled and can return to work full-time, when they reach the end of their benefit duration, when they hit the limit for a specific condition like mental health or substance use, or in the event of their death. If a claimant passes away while receiving benefits, a survivor benefit applies. This provision ensures that the surviving spouse, children, or parents—paid in that order—receive a lump sum equal to three times the monthly disability benefit the claimant was receiving before they passed.

At the end of the session, a few final questions came in. One asked about the difference between partial disability and zero-day residual. The response explained that zero-day residual simply means the employee can qualify for partial disability benefits from the first day of disability, without needing to be totally disabled first. This allows the individual to satisfy the elimination period while working part-time or earning reduced income. Another question was about whether premiums are still required while receiving benefits. The answer confirmed that premiums are waived beginning the first of the month after benefits start. However, during the elimination period itself, premiums must still be paid.

There was also clarification around whether Mutual of Omaha offers both short-term disability (STD) and long-term disability (LTD). The answer was yes—Mutual of Omaha offers both, and employers can choose to offer either or both policies, depending on their needs. While they are separate policies, they are often bundled together.

Lastly, participants were reminded to fill out the CE credit form accurately and to list the session time from 11:00 AM to 1:00 PM, regardless of whether the presentation ended slightly early. This ensures proper credit is awarded for attendance. More CE-credit webinars are scheduled for the future, and participants were encouraged to register for additional sessions led by Mutual of Omaha.