than this summary provides:

employees of medium and large firms.

Bureau of Labor Statistics, 1990.

Earlier Studies
Earlier Employee Benefits Survey studies have examined short-term disability plans in more detail
© William J. Wiatrowski, “Employee income protection against short-term disabilities,” Monthly
Labor Review, February 1985, pp. 32-38, explores a variety of provisions of short-term disabil-
ity plans among full-time employees of medium and large private employers.
© James Houff and William J. Wiatrowski, “Analyzing short-term disability benefits,” Monthly

Labor Review, June 1989, pp. 3-9, presents results of a short-term disability plan model that
projected days of coverage, full-pay equivalent days, and income replacement ratios for full-time

Both studies are reprinted in Employee Benefits Survey: ‘An MLR Reader, BLS Bulletin 2362,

—ENDNOTES—

"This article is based on data from the 1993 Employee Benefits Survey of
medium and large private establishments (those with 100 or more employ-
ces), as well as the 1994 surveys of small private establishments (those with
fewer than 100 employees) and State and local governments. (Unless other-
wise noted, all data in this article are from the medium and large private es-
tablishment survey.) These surveys cover 98 million employees (78 million
full-time and 20 million part-time) in the private and public sectors. The
Employee Benefits Surveys are conducted by the Bureau of Labor Statistics
to obtain information on the incidence and characteristics of employer-pro-
vided benefits. For more information, see Employee Benefits in Meditan and
Large Private Establishments, 1993, Bulletin 2456, Bureau of Labor Statis-
tics, 1994, Employee Benefits in Small Private Establishments, 1994, Bul-
letin2475, Bureau of Labor Statistics, 1996, and Benefits in State

Employee.
and Local Governments, 1994, Bulletin 2477, Bureau of Labor Statistics, ~

1996,
2 Work related illnesses and injuries are covered under Worker’s Com-
ability, workers may be covered by long-temm disability insurance or disabil-
ity provisions of defined benefit plans. See Diane B. Hill, “Employer-spon-
sored long-term disability insurance,” Monthly Labor Review, July 1987 and
Donald R. Bell and William J. Wiatrowski, “Disability benefits for employ-
ees in private pension plans,” Monthly Labor Review, August 1982.

5 Percent of employees participating in paid sick leave and sickness and
accident plans, by sector and by full and part-time status, 1993-94.

«Data are from full-time employees in medium and large private estab-
lishments, 1993.

5-The Employee Retirement Income Security Act of 1974 (ERISA) deals
with the establishment, operation, and administration of welfare and pension
plans.

©The 1993 medium and large private establishment survey found that the
average fixed percent of earnings benefit was 58 percent of predisability wages
for full-time employees. Data for the table are for full-time employees in
medium and large private establishments, 1993.

7 percent of workers with percent of eamings sickness and
accident plans have a dollar limit on benefits. ‘This, in effect, sets alimit on
earnings, above which the employee gets a fixed benefit. Forexample,a plan
may provide 50 percent of predisability income up to $300 per week. Any
employee who eams $31,200 or more annually would receive the maximum
weekly benefit of $300. By comparison, an employee who eamed $20,000
annually would receive a weekly benefit of $192.31.

‘Flat dotlar benefit plans, in comparison to percent of earnings plans, pay
a fixed weekly dollar amount, usually irrespective of eamings. The 1993
medium and large private establishment survey found that the average flat
dollar amount of sickness and accident plans per week was $156 for full-time
employees. Data for the table are from full-time employees in medium and
large private establishments, 1993.

* Both States permit an employer to substitute a private plan for the State
plan ifthe benefits provided are at least equivalent. In New York, many em-
ployers agree to pay the emplayee’s share of the costs. California and Rhode
Island also have mandated temporary disability insurance plans, but these
plans require no employer contribution and therefore are not covered in the
Employee Benefits Survey.

© The level of employer costs for employee compensation shown in the
table was calculated using different employment patterns for each successive
time period. Therefore, changes in cost levels over time reflect both changing
rates of compensation and changes in relative employment among occupa-
tions and industries with different rates of compensation. The BLS advises
caution in interpreting short-term comparisons.

Compensation and Working Conditions Summer 1997 56


selected years, 1980-93
Percent

Chart 3. Percent of employees by sickness and accident plan types,

70
60
50b
40
30

20
10

gl i i . 1
1980 1981 1982 1983 1984 1985 1986 1988 1989 1991 1993

Fixed percent Percent of
of earnings earnings varies

Fixed dollar Dollar
amount amount varies

NOTE: Data are for full-time employees in medium and large private establishments.

mandates employer coverage of employees, but unlike New
York and New Jersey, the State does not manage the plan.

Employers’ cost data

The employers’ cost of providing sick leave and sick-
ness and accident plans has remained relatively stable since
1991, the first year data were available for both benefits.
The adjacent table illustrates these costs, both as an em-
ployer cost per hour worked for employee compensation
and as a percent of total compensation."

The first year that long-term disability costs (account-
ing for $.02 per hour worked and 0.1 percent of total com-
pensation) were published separately and not included in
sickness and accident costs was 1996. As such, the appar-
ent drop in sickness and accident costs between 1995 and
1996 is not a true decrease, but a result of the new data
breakout.

55 Compensation and Working Conditions Summer 1997

1991

1992

1993

1994

1995

1996

Cost per hour worked and percent
Of for—
Sick Sickness and

leave accident

pay insurance
Cost .. $0.13 $0.04
Percent. 08 03
Cost . 14 05
Percent. 2 3
Cost . 14 05
Percent. 8 3
Cost .. 14 05.
Percent & 3
Cost .. 14 04
Percent. 8 3
Cost .. 14 03
8 2



Emplo B

Short-term
Disability Benefits

BY HILERY SIMPSON.

Just over 60 percent of full-time employees were eligible
for short-term disability (STD) protection in 1993-94."
These plans are designed to protect employees against lost
income due to non-work related illnesses or accidents? STD
benefits include paid sick leave plans that commonly re-
place earnings for a fixed number of days per year, as well
as sickness and accident plans that replace a portion of eam-
ings for a fixed period of time, commonly 26 weeks.

The incidence of short-term disability benefits varies by
sector and by full- and part-time status as shown (in per-
cent) in the following table’:

Private Public Full Part-

sector sector time time

Benefit em em emo
PIaYeeS ployees ployees ployses ployees
Sick leave 53 47 85 62 7
Sickness and
accident plans 2 3 19 32 15

While public sector employees are almost twice as likely
to have paid sick leave benefits as their private sector coun-
terparts, private sector employees are more likely to have
sickness and accident benefits. Full-time employees are
twice as likely to participate in a sickness and accident plan
and more than four times as likely to be covered by a sick
leave plan than are part-time employees. Roughly one in
four full-time employees have both paid sick leave and sick-
ness and accident insurance.

The Employee Benefits Survey (EBS) started collecting
data on STD benefits in 1979 for full-time employees in
medium and large private establishments. Since then, the
scope and detail of the data has expanded greatly. For ex-
ample, information is now available from State and local
governments and from small private establishments. In
addition, data are now published on waiting periods, ben-
efit amounts, and other short-term disability benefit provi-
sions.

Hilery Simpson is an economist in the Division of Compensation Data
Analysis and Planning, Bureau of Labor Statistics. Telephone (202) 606-
6207.

Paid sick leave

Data from the EBS show that 53 percent of all employ-
ees were covered by sick leave plans in 1993-94. Coverage
for full-time employees ranged from 50 percent of workers
in small private establishments (fewer than 100 workers)
to 94 percent in State and local governments. Coverage
was 65 percent among medium and large private establish-
ments (100 or more workers).

There are two primary types of sick leave plans: Annual
plans and per-disability plans. Most employees with sick
leave benefits are in annual plans. These allow a fixed num-
ber of sick days off per year. Less common are per-disabil-
ity plans that provide a specified number of days periliness
or injury. A small portion of workers are covered by both
annual and per-disability benefits; in such instances, the
annual component is commonly used for occasional absences
and the per-disability component for longer absences. Least
common are plans that provide an unlimited number of paid
sick days on an “‘as needed” basis. The percent of employ-
ees covered by the various sick leave plan types are in the
table below’:

Percent of full-time

Type of sick leave plan

Annual plans only 75
Per-disability plans only 7
Both annual and per-disability 6
As needed 1

Annual plans. The number of days of paid sick leave under
annual plans can vary according to the participant’s length
of service, such as 12 days after 1 year of service, 17 days
after 5 years, and 22 days after 10 years. (See chart 1.)
Nearly all workers covered by annual plans receive full pay
while they are sick and are not subject to a waiting period
before benefits begin.

Annual sick leave plans also allow many employees to
carry over and accumulate unused sick leave from year to
year. Known as cumulative plans, most have limits on the
amount of sick leave, often 30 days, that can be carried
over to the next year. Less common are cumulative plans

Compensation and Working Conditions Summer 1997 52


sick leave plan, 1993
Average days per year

160

Chart 1. Average number of days per year at full pay by type of

140
120
100
80
60
40
20
0

4 3 § 10
Years of service

15 20 25

Annual sick leave days by
A minimum service requirements

Per-disability sick leave days
minimum service requirements

NOTE: Data are for full-ime employees in medium and large private establishments

that allow workers to stockpile an unlimited amount of sick
leave. Noncumulative plans commonly provide a greater
number of days per year than cumulative plans; this differ-
ence usually increases with length of service.

Per-disability plans. Sick leave plans that commonly pro-
vide a fixed number of fully and partially paid sick days per
illness are known as per-disability plans. Like annual sick
leave plans, the total days available for each disability can
become more generous as an employee’s length of service
increases. (See chart 1.) The following is an example of
this type of provision in a per-disability sick leave plan:
Days at 50

Length of service Days at full pay —_ percent of
pay

1 year 20 45

3 years 40 2

5 years 65 65

10 years 100 wo

20 years 130 0

As this example shows, the total number of leave days, as
well as the percentage of fully paid days, increase with
fength of service.

Seventy-one percent of workers can use sick leave (re-
gardless of plan type) for reasons other than illness or acci-
dent. Common uses include doctors’ appointments (60 per-
cent) and caring for a sick child (37 percent).

Sickness and accident plans

Almost a third of all full-time workers (32 percent) were
covered by sickness and accident plans in 1993-94. Cover-
age ranged from 21 percent of workers in State and local

53 Compensation and Working Conditions Summer 1997

governments to 44 percent in medium and large private
establishments. Among small private establishments, 26
percent were covered,

Funding. There are three basic methods used by employers
to fund sickness and accident plans: Self-insured, unfunded,
and insured. Under self-insured and unfunded plans, the
employer assumes all risks and expenses of providing the
benefit. A self-insured plan requires the employer to have
liquid assets corresponding to the projected liability of the
plan. These plans must be registered with the U.S. Depart-
ment of Labor and are guaranteed by the Employee Retire-
ment Income Security Act (ERISA) of 1974.5 Unfunded
plans, on the other hand, are financed out of current oper-
ating funds. Unlike self-insured plans, there are no Fed-
eral filing requirements nor are the benefits guaranteed by
ERISA.

Another common method of financing sickness and ac-
cident plans is through private insurance. Under this ar-
rangement, the employer pays a monthly premium to an
insurance carrier in exchange for the carrier assuming the
risks and expenses of underwriting the policy. The actuari-
ally determined premium is generally specified as a rate
per $10 of weekly benefits per month.

Benefits. Sickness and accident plans primarily pay ben-
efits either as a percent of employee earnings or as a flat
dollar amount. (See chart 2.) Though not common, ben-
efits under both plan types can vary depending upon earn-
ings and length of service, among other factors.

Most common are percentage of earnings sickness and
accident plans. These plans typically replace from half to


full-time employees, 1993

Fixed percent 59.4%

medium and large establishments.

Chart 2. Method of benefit payment for sickness and accident plan,

NOTE: Percent of benefits depend upon earnings, length of service, or length of disability. Data are from

Flat dollar amount 28.7%

Other 1.0%

Dollar amount varies 5.0%
7

7 Percent varies 5.9%

two-thirds of pre-disability income as shown in the follow-
ing table®:

Benefit percentage for fixed Percent of full-time
percent plans employees
Less than 50 percent 1

50 percent 41

51-59 percent 2

60 percent 24

61-69 percent 22

70 percent 5

71-79 percent 3

‘80 percent or more 2

While higher wage earners generally receive a higher
benefit under percent of earning plans, a majority of these
plans have a dollar limit on the amount of the weekly ben-
efit.”

Less common are flat dollar sickness and accident plans
that provide either a fixed weekly amount, such as $150, or
a dollar amount that varies by earnings, length of service,
or length of disability. The majority of these plans pay a
weekly benefit of less than $200. The percent of full-time
employees with flat dollar benefit sickness and accident
plans by weekly benefit amount is presented in the follow-
ing table*:

Weekly benefit for flat dollar Percent of full-time
plans employees
Less than $100 20

$100 - $199 56

$200 - $299 19

$300 or more 5

Plan types

The distribution of sickness and accident plan types have
changed significantly since EBS started collecting these data
in 1979. (See chart 3.) Since 1980, percent of earnings
plans have become significantly more common while vari-
able percent of earnings and variable dollar amount plans
have become noticeably less common. Fixed dollar amount
benefit plans have consistently hovered around 30 percent.
In general, the incidence of sickness and accident types has
varied little since 1988.

Waiting periods. Virtually all sickness and accident plans
have a waiting period that must be met before benefits be-
gin, most commonly 1 to 7 days. Waiting periods may be
shortened or eliminated entirely for employees involved in
an accident or who are hospitalized under certain plans.
The waiting period is effectively dropped in establishments
that provide both a sick leave and a sickness and accident
plan since insurance payments typically start immediately
after sick leave pay ends.

Non-work illnesses and injuries. Several States mandate
plans that provide benefits to employees who have a non-
work related illness or injury. For example, workers in New
Jersey and New York are covered by mandatory temporary
disability plans that are at least partially employer financed
and managed by the State. Both States pay benefits based
on a proportion of a worker’s earnings for up to 26 weeks
with a limit on the weekly benefit amount.” Hawaii also

Compensation and Working Conditions Summer 1997 54