Benefits Insight: Interaction of MA Paid Leave and Group Disability Plans

The recent guidance released by the MA Department of Paid Leave has made it clear that the MA Paid Leave plan will coordinate well with existing group disability plans. 

Originally, there was confusion around whether or not an employee could receive benefits through both the state plan, public or private. The confusion stemmed mainly from the terms “temporary” and “permanent” disability plans that exist in the statute. The statute allowed for coordination with temporary disability plans but did not allow for an offset with permanent disability plans.   

The new guidance considers both short-term and long-term disability plans to fall under the temporary disability coverage designation. This allows the plans to coordinate benefits effectively by providing a direct offset. In many cases, an employee may currently have disability coverage through their employer that will pay over and above the maximum benefit provided by the state benefit ($850 per week at the time the law was implemented. 2021 benefit TBD). In this case, an employee who qualifies for a benefit from both plans would still receive the state plan benefit up to the maximum. Additionally, they would receive their additional benefits due through their group disability plan. In this scenario, the MA Paid Leave benefit is primary and the group disability plan benefit is secondary. The group plan is able to offset for the benefit paid in accordance with the state plan. 

For example, an employee earning $87,000 per year would qualify for weekly benefit of $1,004/week under a typical group disability plan that replaces up to 60% of income. If this employee were unable to work due to illness or injury, they would will still receive this same benefit. They would receive a benefit of $850/week through their MA Paid Leave plan, and the balance of $154/week through the group disability plan, for a total of $1,004/week. If the employer were insuring through the public plan, the employee would receive benefits from both the state and the group plan insurer. If the employer has insured the MA Paid Leave plan through a private option, they will likely receive the full benefit from a single source.   

Disability insurers are already working to reduce the cost of group disability plans to account for the lower benefit amounts that the plan will group disability plan will pay (since the plan is only paying the balance). This allows employers to maintain their disability plans alongside the state plan, and ensure that their employees receive the full benefits that the employer intended. Most plans can be maintained with little or no changes to existing plan designs.   

To learn more about putting together your company's action plan for MA Paid Family and Medical Leave, watch our 2-part series On Demand: MA Paid Family & Medical Leave 2020 Update