The group plan caps its benefit, so the better someone is paid, the less of their income it actually replaces.
Group life and disability are built for the median employee: a percentage of salary up to a flat or monthly maximum, often on base pay only. For executives, owners and high earners that maximum arrives early and the bonus may not count at all. We measure the real gap for each person and decide what should fill it, and who should pay for it.
Three plan provisions quietly shrink coverage at the top.
None is a flaw. They are what keeps a group plan affordable, so the people they cut off need a separate answer.
The Benefit Maximum
Group long-term disability pays a percentage of covered pay up to a monthly cap. Above the cap every raise adds nothing to the benefit, so a senior employee’s real replacement ratio is often far below the plan’s headline percentage.
The Definition of Earnings
Many policies define covered earnings as base salary. For a sales leader or an owner paid largely through bonus, commission or distributions, the benefit is calculated on a fraction of actual income so we read the definition before the rate.
The Guaranteed Issue Limit
Group life above a set amount requires evidence of insurability. The executive who most needs the higher amount is often the one most likely to be delayed or declined, so we time applications to an enrollment window rather than a mid-year promotion.
Who pays the premium decides whether the benefit arrives taxed.
Under IRS rules, disability benefits from a plan the employer pays for are taxable income to the employee, while benefits from a policy the employee paid for with after-tax dollars are not. Group life has its own rule: employer-provided group-term coverage above $50,000 creates imputed income.
Employer-Paid Disability
It is the most generous-looking option and produces the smallest check at claim time, because the benefit is taxed exactly when income has stopped. We show the after-tax benefit next to the premium, so the comparison is honest.
Employee-Paid or Grossed-Up
Shifting the premium to the executive, or paying a taxable bonus to cover it, keeps the eventual benefit tax-free. The right choice depends on the company’s tax position and the individual’s, which a CPA available through us weighs in on.
Imputed Income on Life
Raising group-term life for executives adds imputed income to every paycheck, valued from the IRS premium table by age. For older executives that cost can rival an individual policy, so we compare both before raising the group amount.
Supplemental coverage should be designed around what happens at a claim and at a departure.
The layer above the group plan is usually individual coverage the employer sponsors for a defined class.
Individual Disability on Top
An individual policy fills the space between the group cap and a sensible replacement target, and can carry own-occupation language the group plan lacks. Offered to a defined class, it can often be issued with reduced medical underwriting.
Integration with the Group Plan
Supplemental disability has to sit on top of group coverage without triggering its offset or overinsurance provisions, because a policy that reduces the group benefit has bought nothing.
Life Coverage That Travels
Group life usually ends, or converts on expensive terms, when employment ends. An individually owned policy stays with the executive, so we decide at the outset whether that portability is a reward or a retention problem.
What employers ask about covering their executives.
Can we give richer coverage only to executives?
Individual policies outside the group plan can generally be offered to a defined class. Inside the group-term life plan it is different: Section 79 has nondiscrimination rules, and a plan that favors key employees can cost them the tax exclusion. Counsel confirms the route.
Will the executive have to answer medical questions?
Not always. Coverage offered to a whole class on a defined basis can often be issued with limited underwriting up to a set amount. Above that, individual underwriting applies, which is why we apply for the class together, not one person at a time.
What happens when the executive leaves?
An individually owned policy can usually be continued at the executive’s own cost. Whether that is a benefit you want to give is a design decision we make with you up front, not something discovered at the exit interview.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Cookies on This Site
We use cookies to keep the site working properly and to understand how it is used. You can decline anything that is not essential. See our Privacy Policy for the detail.
- Essential — needed for the site to load and for you to move around it. These cannot be switched off.
- Analytics — tell us which pages get read, so we know what is worth writing more of.
- Advertising — set by third parties such as ad and social platforms to measure and target campaigns.