The income gap in a disability claim almost always sits at a handoff between two programs.
Sick time ends, short-term disability starts after a waiting period, long-term disability starts after its own, and a state benefit may offset one of them. Each plan can be sensible on its own and still leave an employee with weeks of no income. We line the plans up end to end, on one calendar, before anyone files a claim.
Three handoffs decide whether income is continuous.
We lay every program on one timeline, from the first missed day to the long-term benefit, and look for the days no plan pays.
Sick Time to Short-Term
The short-term plan’s elimination period should match what sick time or PTO can realistically cover. A long elimination period and a small PTO bank leave new and lower-paid employees exposed first, because they have the least time banked. Matching elimination periods to PTO closes short-term disability gaps. For a quick estimate, use our free paid time off liability calculator.
Short-Term to Long-Term
The long-term plan should start paying the day short-term benefits end. When the two are bought separately, a gap of weeks is common, which is why we design and market them as a pair. Designing short-term and long-term disability together prevents income gaps. Our free disability income gap calculator turns this into dollars for your plan.
The Definition of Disability
Short-term plans often test the employee’s own job while long-term plans may shift to any occupation after a period. An employee approved by one and denied by the other loses income at the worst moment, so we compare definitions line by line.
Offsets and taxes decide the check, not the benefit percentage.
A plan’s stated percentage is before offsets for other income and before tax. Under IRS rules, benefits from an employer-paid plan are taxable to the employee; benefits from a plan the employee paid for with after-tax money are not.
Other Income Offsets
Long-term plans usually reduce benefits by Social Security disability and state disability payments. We show employees the net benefit, since the gross percentage in the plan summary is the number they remember. Showing the net benefit sets realistic long-term disability expectations.
Who Pays the Premium
Employer-paid coverage is simple to offer and produces a taxable benefit. Employee-paid coverage costs employees each paycheck and produces a tax-free one. We model both, and some employers choose differently for each plan. Premium structure shapes the value of disability coverage.
Pre-Existing Conditions
Many long-term plans exclude conditions treated shortly before coverage began. A new hire with a known condition can have short-term coverage and no long-term coverage, which HR should know before it becomes a surprise. Knowing the pre-existing condition rules helps HR support new hires.
A disability claim and a leave of absence are two processes about the same person.
The disability carrier decides whether income is paid; the employer decides whether the job and the health coverage are protected. They rarely talk unless the process makes them.
FMLA Runs Alongside
Time on short-term disability can be designated as FMLA leave, but paid time off cannot be required as a substitute while disability benefits are being paid. The policy has to say what happens to PTO during that period. Clear PTO rules keep disability and FMLA coordination smooth.
When Protected Leave Ends
FMLA can run out while disability benefits continue. What happens to the job then can become an accommodation question as much as a leave question, so we flag the date well ahead and bring in counsel. Planning for the end of FMLA protects employers and employees.
Salary Continuation
Some employers self-fund short-term disability as salary continuation. It is flexible, and it puts the employer in the position of deciding claims, which needs a written standard applied the same way every time. A written standard keeps salary continuation plans fair.
State Disability Programs
In states with mandatory disability or paid leave benefits, the group plan should coordinate with the state benefit rather than duplicate it, so the employer is not paying twice for the same weeks. Coordinating with state disability programs avoids duplicate costs.
One Hypothetical Calendar, Start to Finish
These numbers are hypothetical and chosen only to show how the pieces connect. Your own plan documents set the real lengths.
The Hypothetical Plan Design
Assume a 14-day short-term waiting period, up to 11 weeks of short-term benefits, and a 90-day long-term elimination period. Sick time covers the first few days. These figures are only an example to show how the pieces fit together. Real plans vary, so compare this layout with your own policies, and note how your sick and PTO rules interact with the waiting periods.
Days 1 to 14
The employee uses sick time or PTO, then goes unpaid for any remaining days. The short-term claim should be filed early because the carrier needs medical evidence before it approves. Employees often wait to file until they feel the pay gap, which delays approval. Encourage early notice to HR and the carrier, and make sure managers know whom to send employees to.
Weeks 3 to 13
Short-term benefits pay a percentage of pay, up to the plan maximum. Fourteen days plus eleven weeks is 91 days, so the short-term period ends right as the long-term elimination period is satisfied. Check your own booklet for the benefit percentage, the maximum weekly amount and how other income reduces the payment, because those details differ by policy and drive what the employee actually receives.
Where a Gap Appears
If the long-term elimination period were 180 days instead of 90, the employee would have roughly three months with no disability income. This is the most common design error we look for. Compare the short-term and long-term designs side by side, not separately, since each was often chosen at a different time. A gap that exists on paper can become a real hardship for an employee.
Where an Overlap Appears
If short-term benefits ran 26 weeks while long-term began at 90 days, the plans would overlap. Some long-term plans treat short-term benefits as an offset, which defeats the point of paying for both. Review how the two policies define offsets and whether benefits are reduced when both pay. Ask your adviser to model the combined result for a typical salary so you know what an employee would truly receive.
Why Claims Should Be Filed Early
Long-term carriers usually want notice during the elimination period. Telling the employee and HR to notify both carriers early protects the timeline. Confirm notice requirements in the certificate. Make early notice part of your leave procedure, with a checklist HR can follow when an absence begins. Missing a notice window can complicate a claim, so keep the certificate language handy.
Job Protection and Income Replacement Are Separate Questions
FMLA decides whether the job is held. Disability insurance decides whether pay continues. The Department of Labor’s Fact Sheet 28 describes the leave side.
FMLA Is Unpaid
Eligible employees may take up to 12 workweeks of job-protected leave in a 12-month period for most qualifying reasons. The leave itself is unpaid. Eligibility and the details of the leave depend on facts and on state rules, so confirm your obligations with counsel. Employees often mix up unpaid job protection with income replacement, which is why clear communication matters.
Who Is Eligible
The employee must have worked for the employer at least 12 months, have 1,250 hours in the prior 12 months, and work at a location with 50 or more employees within 75 miles. The employer must be a covered employer.
Health Coverage Continues
During FMLA leave, group health coverage must be maintained on the same terms as if the employee had not taken leave. Plan how the employee’s share of premium is paid during unpaid weeks. Decide in advance how premiums will be collected during unpaid weeks, whether through catch-up deductions or direct payment, and explain the arrangement in writing. Counsel and payroll can confirm the right approach for your plan.
Running Concurrently
A disabling condition can qualify for both. Employers can generally count the leave as FMLA while disability benefits are paid, and may require or allow paid leave to run during FMLA. Check with your employment counsel. Keep leave and disability tracking aligned so dates, designations and notices match across systems. Mismatched records are a common source of confusion, so have HR use one calendar for both and bring counsel in early on complex cases.
Employees Not Covered by FMLA
An employee who is not eligible for FMLA may still have a disability claim. Disability coverage does not depend on FMLA eligibility, although a job may not be protected. HR should explain this distinction to employees who are new or part-time, because they may assume no coverage applies. Review the plan’s eligibility terms and let the carrier decide whether the claim qualifies.
Intermittent Absences
Intermittent FMLA leave for a chronic condition does not always meet the disability plan’s definition. Ask the carrier how partial or intermittent absences are handled. Employees with chronic conditions often need flexible schedules instead of full time off, so ask whether the policy covers reduced hours and what documentation the carrier expects. Set expectations before a claim, not during one.
How Social Security Disability Interacts With Employer Plans
The Social Security Administration runs a separate program with a stricter test. Employer plans often depend on it.
A Stricter Test
Social Security pays for total disability only, expected to last at least 12 months or result in death. Partial and short-term disabilities do not qualify, according to the SSA. Because the federal test is narrower than most private disability plans, employers should not assume employees will qualify. Encourage staff to ask the agency about their own situation, and avoid promising a particular outcome.
Substantial Gainful Activity
The SSA looks at whether the person can do substantial gainful work. For 2026 the earnings threshold is $1,690 a month for people who are not blind.
The Five-Month Wait
There is a five-month waiting period, and the first payment is made in the sixth full month after the disability starts. That timing lines up closely with a typical short-term plus long-term sequence. Employees should understand that federal benefits may arrive well after income stops, so private disability coverage often carries the household in the meantime. Rules can change, so point employees to the agency for current details.
Offsets in the Long-Term Plan
Many long-term policies reduce their benefit by the Social Security amount the employee receives or is estimated to receive. Read the offset language in the certificate. Ask the carrier to show an example of how the offset would work for a typical claim, and explain to employees that the policy payment may shrink if they later receive other income benefits.
Applying Early
Because approval can take time, some long-term carriers require or help with an application. Ask what help your carrier gives and whether failing to apply affects the benefit. Employees often find the application process confusing during an illness, so ask whether the carrier offers guidance and give HR a simple handout. Check the certificate to see what happens if an employee does not apply.
Repayment When Back Pay Arrives
If Social Security approves benefits with retroactive payments, the carrier may ask for the overlapping amount back. Employees should hear this before it happens. Build a short note into claim paperwork that explains how overpayments work and what employees might owe, so a later repayment request does not feel like a surprise at an already stressful time.
When an Injury Is Work-Related
General points only. Workers’ compensation law is specific and we are not legal advisers.
A Separate System
Michigan’s workers’ disability compensation system pays medical costs and wage-loss benefits for work-related injuries and illnesses. It runs alongside employer disability insurance and is not a substitute for it. Employers usually handle those claims through a separate process with different carriers and rules. HR should keep the two tracks distinct so employees know where to go, and counsel can answer legal questions about overlap.
Wage Loss and Waiting Period
Michigan’s Workers’ Disability Compensation Agency says wage-loss benefits are roughly 80 percent of after-tax wages, with a seven-day waiting period before they begin.
Exclusions and Offsets
Disability policies commonly exclude conditions covered by workers’ compensation or reduce the benefit by what workers’ compensation pays. Read the exclusion and offset clauses. Read these clauses with your own claim scenarios in mind, and ask the carrier how an employee with an injury of uncertain origin would be handled. A short example in the booklet can prevent later disputes.
Disputed Claims
If workers’ compensation is denied, the employee may turn to the disability plan while the dispute continues. Ask the carrier whether it pays and then recovers, or waits. Get the carrier’s answer in writing before a dispute arises, including what repayment would look like if the other claim is later approved. Employees need to hear this plainly so they are not caught off guard.
State Temporary Disability Programs
Michigan has no state temporary disability insurance program. Employees in a few other states, including California, New Jersey and Rhode Island according to the SSA, have one, and plans often integrate with it. Where such programs exist, rules and benefit amounts differ by state, so employers with staff in several places should ask the carrier how each location is treated and confirm details with counsel.
Multi-State Employers
If you have remote or out-of-state employees, ask the carrier and counsel how state programs and state leave laws apply to each location. Keep a list of where each employee actually works, because coverage, leave rules and payroll treatment can follow the work location. Review that list at renewal and whenever someone moves.
Sick Time, PTO and Salary Continuation
Employer-paid time off is the first layer and it needs to sit cleanly on top of the disability plans.
Earned Sick Time Act
Michigan requires employers to provide paid sick time, effective February 21, 2025. Accrual is one hour for every 30 hours worked, with annual use caps of 40 hours for small businesses and 72 for others, per the state agency.
PTO and Disability Pay
Decide whether employees must use PTO during the waiting period, whether they can top up disability pay with it, and whether the plan lets them keep a PTO balance. Write the rule down. Share the rule in your handbook and your leave paperwork so managers apply it the same way every time. Consistency matters, and payroll should confirm how each choice shows up on the paycheck.
Topping Up Benefits
If an employer supplements disability benefits to full pay, some plans treat that as other income that offsets the benefit. Ask the carrier before you adopt a top-up policy. Even a well-meant supplement can reduce what the carrier pays, leaving the employer to carry more cost than expected. Run the numbers with your adviser and payroll team and get the carrier’s position first.
Salary Continuation
Some employers pay regular pay during illness from general assets, with no insurance. The Department of Labor rule at 29 CFR 2510.3-1 describes when that is not an ERISA plan. Get counsel’s view.
Pregnancy and Childbirth
Under the EEOC’s guidance, pregnancy-related disability is treated like other temporary disability for benefits. Bonding time after recovery is leave, not disability. Plan both pieces. Because the rules differ by employer size and by state, ask counsel how they apply to your group. Many employers map out the timeline for recovery and bonding leave before an employee needs it.
Equal Treatment
Apply the same leave and pay practices to similar conditions. Consistent rules are easier to administer and easier to defend. Document how decisions are made and who approves exceptions. Counsel can help you review the policy for fairness issues, and managers need guidance so similar employees are not handled differently by accident.
Bringing an Employee Back
A planned return ends claims sooner and is easier on the employee. Disability plans can help or get in the way.
Residual Benefits
Some plans pay a partial benefit when an employee returns part-time or at reduced pay. Ask how earnings are counted so the employee is not worse off by working. Ask for a worked example showing take-home pay at several earnings levels, since this feature is useful only if employees understand it. Explain it during enrollment so it encourages a gradual return to work.
Rehabilitation Provisions
Plans may pay for approved training or programs. MetLife’s published sample schedule includes a rehabilitation incentive, so ask whether yours does and who arranges it. Ask whether participation is voluntary, who pays for the program, and how it affects the monthly benefit. Employers should also confirm how the provision is described in the certificate before mentioning it to employees.
Accommodations
Employers may owe reasonable accommodations under the ADA, and for pregnancy-related limits under the Pregnant Workers Fairness Act. Involve counsel early in complex returns. Start the conversation with the employee and their provider early, and keep notes on the options considered. Return-to-work plans work best when HR, the manager and the carrier share the same facts.
Recurrent Disability
If the same condition returns soon after a return to work, the plan may treat it as one continuous claim. Know the window and tell employees. Ask the carrier how long the look-back window is and what documentation restarts the clock. Telling employees about it before they return helps them understand why a quick relapse may be handled as a continuing claim.
Communication During Leave
Keep one HR contact, send claim paperwork promptly and avoid pressuring the employee. Document what you send and when. A calm, regular check-in helps the employee feel supported and keeps the file accurate. Agree on what the manager may and may not ask about, and have counsel review sensitive situations before anyone responds.
Coordinating With the Carrier
Ask the carrier for a return-to-work contact and expected dates. Share job descriptions so modified-duty options can be assessed. A named contact on each side makes questions easier to resolve. Update the carrier when the job changes, and tell the employee clearly what to expect so a return does not stall over missing paperwork.
Six Checks Before You Sign Any Disability Renewal
We walk clients through these at renewal, using their own plan documents.
Line Up the Calendar
Write each plan’s waiting period and benefit period on one timeline and look for gaps and overlaps. Use one page for the whole plan year and mark where sick time, PTO, short-term, long-term and any leave overlap. Seeing everything together usually exposes problems that single policy documents hide.
Compare Definitions
Confirm how disability is defined in each plan and when the long-term definition changes. Look at what the plan says about the employee’s own job during the early period versus any job during the later period. Definitions that change over time can surprise employees who assume the test stays the same.
List the Offsets
Collect the offset clauses from both plans and identify which other income reduces each benefit. Include Social Security, workers’ compensation, retirement and other income sources the plan names. Writing them in a simple table helps HR explain to employees why a payment may be lower than expected.
Match Leave Policies
Confirm that the handbook, the FMLA policy and the disability certificates say consistent things about pay during leave. Where documents disagree, update them so employees receive one consistent message. Ask counsel to review the final language, and train managers to repeat the same facts when employees ask about their pay.
Check Claim Notice Rules
Find the deadline for notice to each carrier and make sure HR and employees know it. Put the deadlines on a one-page checklist that HR keeps with each leave file, and tell employees at the start of an absence so no claim is delayed by a missed notice.
Plan the Return
Ask for the carrier’s return-to-work and rehabilitation support and decide who owns each step. Assign a named owner for each step, such as medical updates, job modification and communication with the employee, so the plan does not stall while everyone assumes someone else is handling it.
Read the Full Disability Guides
The coordination questions above start from understanding each plan. These guides cover each side in detail.
Short-Term Disability Guide
Waiting periods, benefit periods, percentages and cost drivers. short-term disability guide.
Long-Term Disability Guide
Definitions, offsets, limitations and duration. long-term disability guide.
Group Disability Insurance
The overview of how both plans fit together, with the tax treatment. group disability insurance.
Claim Denied
What to do when a carrier says no. Denied claims and appeals.
Help for Employees
How we assist employees with carrier questions. Claims advocacy.
Plan Documents
How to read the certificate. Reading your plan documents.
Related reading: short-term disability guide · long-term disability guide · group disability insurance. We are not tax or legal advisers, and carriers decide claims under their contracts.
What Michigan Law Does And Does Not Provide
Michigan has no state disability or paid family leave program, so every layer of coverage comes from the employer. Here is the legal backdrop.
No State Disability Program
Michigan has no state-run temporary disability insurance. Only California, Hawaii, New Jersey, New York and Rhode Island run mandatory programs, so in Michigan paid income protection for a non-work illness or injury comes from an employer-sponsored plan or an individual policy.
No State Paid Family Leave
Michigan has no paid family and medical leave program. Federal FMLA gives up to 12 weeks of unpaid, job-protected leave, and only at employers with 50 or more employees. A bill to create a state program has been introduced but, as of October 2026, has not been enacted.
Earned Sick Time Act
Effective February 21, 2025, Michigan employees accrue at least 1 hour of paid sick time for every 30 hours worked. Annual use is capped at 72 hours, or 40 hours at employers with 10 or fewer employees. It covers short absences, not extended disability.
How The Layers Fit Together
Sick time covers the first short absences. Short-term disability starts after its elimination period, and long-term disability follows when the short-term benefit ends. FMLA, where it applies, runs at the same time and protects the job, not the paycheck. Details vary by policy, so check each document and map the layers for your own plan.
What This Means For Employers
With no state program behind them, an employer-sponsored plan is the only paid wage replacement most Michigan employees will have. The gap between sick time and a long absence is the exposure a disability plan is built to close. Reviewing the design with an adviser each year helps keep that protection in line with how your employees are paid.
Rules Can Change
Leave and sick time rules in Michigan have changed repeatedly in recent years. We confirm current requirements at plan design and at each renewal, and we recommend employers confirm specifics with their own counsel.
What employers ask about disability coverage.
Should short-term disability be employer-paid?
It depends on what you want the benefit to do. Employer-paid coverage reaches everyone and is easy to explain; employee-paid coverage produces a larger net check. We show both on your own census. Census-based modeling guides short-term disability premium decisions.
Why was a claim approved for STD but denied for LTD?
Usually a different definition of disability, a pre-existing condition exclusion or a missed filing deadline. We review the file with the employee to find which, and whether an appeal is worth pursuing. Reviewing the claim file shows whether a long-term disability appeal is worth it.
Do we need both plans?
Short-term coverage handles frequent claims; long-term coverage handles the rare, costly ones. Dropping long-term coverage saves the least and exposes employees to the largest loss, so it is usually the last plan we cut. Long-term disability coverage protects against the costliest income losses, which is why it is rarely the right plan to cut.
Does Michigan have a state disability program that works alongside our plan?
No. Michigan has no state-run temporary disability insurance, so employer-sponsored short-term and long-term plans are the paid layers. Social Security Disability is a federal program with its own waiting period and a strict definition of disability, and most long-term plans reduce their benefit by it.
What does an offset mean for the benefit check?
Long-term plans typically reduce the monthly benefit by other income the employee receives, such as Social Security Disability or workers compensation. The offset list is written into the policy, so we compare it carrier by carrier.
How do the two plans line up so there is no gap?
The long-term elimination period is usually set to begin when the short-term benefit ends. If the two dates do not match, the employee can have weeks with no paid benefit, so we check the dates side by side.
Does FMLA leave run at the same time as disability leave?
Where FMLA applies, which means employers with 50 or more employees, leave generally can run at the same time as a disability absence. FMLA protects the job and the disability plan replaces part of the pay. Confirm your approach with employment counsel.
Are disability benefits taxable to the employee?
Generally it depends on who paid the premium. Benefits are usually taxable when the employer pays, or when employees pay with pre-tax dollars, and generally tax-free when employees pay with after-tax dollars. Confirm with your tax advisor.
Related reading: Coordination of Benefits
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
ERISA (29 U.S.C. Chapter 18)
The federal law that sets reporting, disclosure and fiduciary rules for employer-sponsored benefit plans.
Family and Medical Leave Act (29 U.S.C. Chapter 28)
Job-protected leave and group health coverage continuation for eligible employees.
Americans with Disabilities Act (42 U.S.C. Chapter 126)
Prohibits disability discrimination in employment and other areas.
Michigan Earned Sick Time Act (MCL 408.961)
Michigan law on paid sick time accrual, use and notice.
Income Continuation Accounts
Wages during the disability waiting period.
Emergency Assistance Accounts
Grants and interest-free loans for employees in a crisis.
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Contribution split by tier
Enrolled counts by tier
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