<ul><li>Industry trends for Group Long Term Disability (LTD) have been moving in the direction of integrated disability so...
Adequate income protection is a critical component of a financial security plan <ul><li>The Risk of Disability: </li></ul>...
<ul><li>The Risk of Long Term Care: </li></ul><ul><li>For a man over 65 , the odds are  1 in 3 or 33%  that he will need L...
Why Firms Should Periodically Review Their LTD Programs <ul><li>Unintended Adverse Impact on Attorneys </li></ul><ul><li>G...
Existing LTD Program <ul><li>Insures 60% of compensation to $25,000 per month of benefit </li></ul><ul><li>Benefits begin ...
Existing LTD Program - Partners Monthly  Group LTD Income Attorney Compensation  Protection Replaced Shortfall Partners ar...
Existing LTD Program – Associate Attorneys Monthly  Group LTD Income Attorney Compensation  Protection Replaced Shortfall ...
Solution: Contemporary Income and Asset Protection   Catastrophic (LTC) Up To 100% Total Income Replacement Maximum Monthl...
Solution: Income Restoration Plan for Partners – 60% Monthly  Group LTD  Income  Individual Combined Combined % Attorney C...
Solution: Income Restoration Plan for Associates – 75% Monthly  Group LTD  Income  Individual Combined Combined % Attorney...
Summary <ul><li>Alleviates Reverse Discrimination </li></ul><ul><ul><li>Highly compensated partner receive protection for ...
Guaranteed Standard Issue *  GSI benefit amounts are estimates based on the number of eligible participants and review of ...
Power of the M Financial Consortium <ul><li>xxxxxxxxxxxxxxxxxxx is a member of M Financial Group, headquartered in Portlan...
M Financial Group’s Unique Relationship with Unum <ul><li>The MonograM individual disability product offers clients  more ...
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Law Firm Disability And Long Term Care

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Creative for Partners of Law Firms to combine disability and long term care insurance

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  • The number one concern of today’s employees having enough money to pay bills during a period of income loss – an issue about which 71% of all employees and 82% of female employees surveyed are “extremely concerned.” Yet, only 60% of full-time employees (and 47% of consumers overall) have disability insurance. Even among those full-time employees who have disability insurance, nearly half (44%) do not know how much coverage they have. Compounding the problem is insufficient benefits education – only 40% of employees understand which employee benefits offerings best meet their needs. Yet, while employees are very concerned about big issues such as income protection (71%), healthcare (59%) and outliving their retirement savings (49%) – they value immediate-term benefits (e.g., paid vacation days) significantly more than protection products, such as disability insurance and life insurance. Disability is often misunderstood when designing key employee benefit programs. Lack of understanding leads to unintended gaps and exposure Disability plans have not kept up with changes in compensation “ One size fits all” approach causes reverse discrimination and other undesirable effects on key employees Waiting until a problem occurs can have disastrous results for employees and employers
  • As for older workers, the “graying” of the U.S. workforce is causing many companies – especially large employers – to change the way they do business. One third (33%) of all employers – and 51% of those with 25,000 or more employees – believe that the aging population will have a big impact on their company. Currently, 19% of all employers offer products and services geared specifically to an aging workforce, such as long-term care referral services, caregiver guides and eldercare support groups . Consequently, these employers predict that the demand for certain employee benefits products will rise. More than one-third (35%) of all employers (and 51% of companies with 25,000 or more employees) expect worker participation in long-term care insurance programs to increase over the next 18 months. One in four (25%) foresees an up-tick in both disability and life insurance enrollment. The cost of nursing home care and comparable care-providers are rapidly escalating. This trend is projected to continue, even as the life expectancies of healthy retirees extend into their 80’s and 90’s. Because of this the probability of needing long-term care significantly increases. The associated costs can drastically exhaust financial wealth that executives had planned on during retirement. Even for relatively short-term situations, the effect of long term care costs on retirement assets without an LTC insurance plan can be significant. Factors compounding the effect include: Lost Investment Opportunity on assets used to pay for long term care Asset Liquidation Costs (i.e. liquidation taxes, cost basis, and market timing) Rapidly Escalating Care Cost and Demand  that could outpace investment returns
  • Currently, only 27% of companies pay the full cost of their employees’ medical insurance – while even fewer fully subsidize dental coverage (19%) and vision care (16%). A relatively high percentage of employers pay the full cost of their employees’ disability insurance (30%) and term life insurance (32%) coverage. Among companies that offer less-traditional benefits on a voluntary basis, a significant percentage provide a company-paid subsidy for: 401(k) or other qualified plans (63%) Critical illness insurance (48%) Long-term care insurance (47%) Estate planning (45%) Term life insurance for spouse or dependents (38%) Financial planning (39%), Annuities (39%), 529 plans (32%) and Legal services plans (29%) Most employers (61%) do not currently offer executive benefits – i.e., benefits that address the special needs of highly compensated employees. The most popular executive benefits are individual disability insurance (offered by 17% of employers and by 29% of companies with 25,000 or more employees), optional/supplemental life insurance (16%) and long-term care insurance (13%). When designing effective disability plans for key employees, it is important to recognize shifting patterns in their compensation. Salary accounted for only 17% of the average CEO’s compensation package in 1995 (as compared to 80% in 1965) Annual incentives amounted to 24% Long term incentives comprised 16% The value of stock options comprised close to 43% of key employee compensation As income from bonus, stock options and other long term incentives become more prevalent forms of key employee compensation, increasing amounts of income are uninsured under group LTD plans.
  • The number one concern of today’s employees having enough money to pay bills during a period of income loss – an issue about which 71% of all employees and 82% of female employees surveyed are “extremely concerned.” Yet, only 60% of full-time employees (and 47% of consumers overall) have disability insurance. Even among those full-time employees who have disability insurance, nearly half (44%) do not know how much coverage they have. Compounding the problem is insufficient benefits education – only 40% of employees understand which employee benefits offerings best meet their needs. Yet, while employees are very concerned about big issues such as income protection (71%), healthcare (59%) and outliving their retirement savings (49%) – they value immediate-term benefits (e.g., paid vacation days) significantly more than protection products, such as disability insurance and life insurance. Disability is often misunderstood when designing key employee benefit programs. Lack of understanding leads to unintended gaps and exposure Disability plans have not kept up with changes in compensation “ One size fits all” approach causes reverse discrimination and other undesirable effects on key employees Waiting until a problem occurs can have disastrous results for employees and employers
  • Law Firm Disability And Long Term Care

    1. 2. <ul><li>Industry trends for Group Long Term Disability (LTD) have been moving in the direction of integrated disability solutions that optimize the advantages of individual and group disability products available in the market today. </li></ul><ul><ul><li>Increasing profits per partner since 2004 leads to more earnings to protect </li></ul></ul><ul><ul><li>Higher issue limits and improved integrated LTD plan designs are now being offered by insurance carriers </li></ul></ul><ul><ul><li>Insurance companies are becoming more aggressive in their bids to insure law firms, resulting in more favorable terms (price, benefit levels and policy provisions) </li></ul></ul><ul><ul><li>Innovative and more comprehensive products are available to effectively address the risk of disability and long term care costs in one policy </li></ul></ul><ul><ul><li>Many law firms are taking advantage of these favorable market conditions to reevaluate and update LTD coverage to better serve the needs of partners </li></ul></ul>Executive Summary
    2. 3. Adequate income protection is a critical component of a financial security plan <ul><li>The Risk of Disability: </li></ul><ul><li>There is a 45% likelihood that a 40-year old will be disabled 90 days or more prior to age 65* </li></ul>Percentage Increases In Submitted Claims Source: Unum * Source: MetLife, The MetLife Study of Employee Benefits Trends, November 2004 Claims Incurred by Cause for Attorneys % of Morbidity Charges Source: Unum
    3. 4. <ul><li>The Risk of Long Term Care: </li></ul><ul><li>For a man over 65 , the odds are 1 in 3 or 33% that he will need LTC in his life. </li></ul><ul><li>For a woman over 65 , the odds are 1 in 2 or 50% that she will need LTC in her life </li></ul><ul><li>In aggregate, 42% of all individuals over age 65 will enter a nursing home in their lifetime. </li></ul>Adequate asset protection is a critical component of a financial security plan By Age 75 (6 in 10) By Age 65 (4 in 10) By Age 55 (1 in 10) Chances of Needing Long Term Care
    4. 5. Why Firms Should Periodically Review Their LTD Programs <ul><li>Unintended Adverse Impact on Attorneys </li></ul><ul><li>Group LTD plans exclude significant forms of compensation resulting in reverse discrimination for partners </li></ul><ul><li>Insufficient coverage for “catastrophic disabilities” that require expensive long term care (pre- and post-retirement) </li></ul><ul><li>Restrictions in group LTD contract language adversely impacts key employees </li></ul><ul><ul><li>Mental/Nervous Limitations </li></ul></ul><ul><li>Group LTD offers no “ownership” of coverage </li></ul><ul><ul><li>Ported coverage is restricted and expensive </li></ul></ul>
    5. 6. Existing LTD Program <ul><li>Insures 60% of compensation to $25,000 per month of benefit </li></ul><ul><li>Benefits begin after 180 days of disability </li></ul><ul><li>Benefits are payable to age 65 </li></ul>
    6. 7. Existing LTD Program - Partners Monthly Group LTD Income Attorney Compensation Protection Replaced Shortfall Partners are adversely impacted. Actual benefit falls significantly short of target benefit. Group only Income Replacement Percentage Target = 60% of Compensation TARGET = 60% Partner A $45,833 $25,000 55% 5% Partner B $62,500 $25,000 40% 20% Partner C $83,333 $25,000 30% 30% Partner D $125,000 $25,000 20% 40%
    7. 8. Existing LTD Program – Associate Attorneys Monthly Group LTD Income Attorney Compensation Protection Replaced Shortfall Associate Attorneys adversely impacted. Actual benefit falls significantly short of target benefit. Group only Income Replacement Percentage Target = 75% of Compensation TARGET = 75% Attorney A $12,500 $7,500 60% 15% Attorney B $20,833 $12,500 60% 15% Attorney C $25,000 $15,000 60% 15% Attorney D $41,667 $25,000 60% 15%
    8. 9. Solution: Contemporary Income and Asset Protection Catastrophic (LTC) Up To 100% Total Income Replacement Maximum Monthly Benefit of $10,000 $3,000 per month ILTC Retirement Years ... and helps preserve assets during retirement AGES 60 - 70 Income Protection Asset Protection Group LTD 60% of Compensation Maximum Monthly Benefit of $25,000 Supplemental Individual 60%/75% of Compensation (less Group LTD benefits) Maximum Monthly Benefit $15,000 - $20,000 Working Years Helps protect income during the working years... Individual Disability Income policies offer enhanced income replacement during the working years, with guaranteed insurability for an Individual Long Term Care insurance policy at retirement. (ILTC of $3,000/mo., 6-year BP, 90-day EP, 100% nursing home care, 50% home care, optional Inflation rider. Up to $5,000/mo. available with no evidence of medical insurability, up to $8,000 with underwriting)
    9. 10. Solution: Income Restoration Plan for Partners – 60% Monthly Group LTD Income Individual Combined Combined % Attorney Compensation Protection Replaced Supplemental Benefit Replaced Partner A $45,833 $25,000 55% $2,500 $27,500 60% Partner B $62,500 $25,000 40% $10,000 $35,000 56% Partner C $83,333 $25,000 30% $10,000 $35,000 42% Partner D $125,000 $25,000 20% $10,000 $35,000 28% Group and Individual Combined w/o Catastrophic Income Replacement Percentage TARGET = 60%* Income replacement level is increased to a more meaningful level. * Target is 60% of Compensation for Partner Attorneys with Non-Taxable Benefits.
    10. 11. Solution: Income Restoration Plan for Associates – 75% Monthly Group LTD Income Individual Combined Combined % Attorney Compensation Protection Replaced Supplemental Benefit Replaced Attorney A $12,500 $7,500 60% $1,875 $9,375 75% Attorney B $20,833 $12,500 60% $3,125 $15,625 75% Attorney C $25,000 $15,000 60% $3,750 $18,750 75% Attorney D $41,667 $25,000 60% $6,250 $31,250 75% Group and Individual Combined w/o Catastrophic Income Replacement Percentage TARGET = 75%* Income replacement level is increased to a more meaningful level. * Target is 75% of Compensation for Associate Attorneys with Taxable Benefits.
    11. 12. Summary <ul><li>Alleviates Reverse Discrimination </li></ul><ul><ul><li>Highly compensated partner receive protection for substantial earnings not covered by the existing group LTD plan </li></ul></ul><ul><ul><li>Ensures partners can meet lifestyle needs and continue to fund retirement plan in the event of disability </li></ul></ul><ul><li>Provides Broader Coverage </li></ul><ul><ul><li>Addresses income protection and asset preservation with one product solution </li></ul></ul><ul><ul><li>More comprehensive individual contract includes LTC Conversion benefit, Catastrophic Disability Benefit, and provides greater payouts than group LTD </li></ul></ul><ul><ul><li>Additional benefits are payable for the most likely cause of executive disability (Mental/Nervous conditions) </li></ul></ul><ul><li>Individual Ownership </li></ul><ul><ul><li>Full portability offers greater flexibility and continuity of coverage </li></ul></ul>Advantages of a Supplemental Disability Plan
    12. 13. Guaranteed Standard Issue * GSI benefit amounts are estimates based on the number of eligible participants and review of census data. Non-Voluntary plans require 100% participation; Voluntary plans require 20% participation. ** Voluntary Plan Discounts illustrated are based on 20% participation rate. Guaranteed standard issue means that the coverage will be issued without medical underwriting, provided the applicant has been actively at work for the past 180 days, and is not currently disabled from Activities of Daily Living or using assistive devices. The Catastrophic Disability Benefit Rider and/or the Lifetime Continuation Benefit can be removed from policy upon application review. Smoker status will apply to premium rates. 30% $5,000 All 200 Attorneys, Voluntary Plan 25% $4,000 80 Partners, Voluntary Plan 40% $10,000+ All 200 Attorneys, Non-Voluntary Plan 35% $10,000 80 Partners, Non-Voluntary Plan Discount** GSI* Description
    13. 14. Power of the M Financial Consortium <ul><li>xxxxxxxxxxxxxxxxxxx is a member of M Financial Group, headquartered in Portland, OR, which is the largest consortium of professional benefit firms in the United States. It was founded in 1978 and currently consists of approximately 120 offices across the United States. The buying power of M Financial has allowed it to: </li></ul><ul><ul><li>Negotiate proprietary product features </li></ul></ul><ul><ul><li>Offer proprietary pricing </li></ul></ul><ul><ul><li>Offer national service with offices in most U.S. cities </li></ul></ul><ul><ul><li>Influence insurance carriers to provide exceptional service </li></ul></ul>
    14. 15. M Financial Group’s Unique Relationship with Unum <ul><li>The MonograM individual disability product offers clients more affordable pricing and more liberal contractual provisions due to M Financial’s favorable morbidity experience and expertise in the executive marketplace. </li></ul><ul><li>M Financial’s clients are provided the highest levels of Guaranteed Standard Issue coverage and plan maximums due to a special reinsurance arrangement. </li></ul><ul><li>Special VIP claims procedures have been developed to insure M Financial’s clients receive more prompt, thorough and customer-focused claims service . </li></ul><ul><li>M Financial has a dedicated home office service and administration team to provide clients with higher levels of service and support . </li></ul><ul><li>M Financial Group is Unum’s largest national marketing partner, which provides clients with a strong advocate in resolving any problems or service issues. </li></ul>M Financial Group’s unique relationship with Unum provides clients with proprietary income and asset protection solutions.

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