Short term disability insurance versus the Family Medical Leave Act (FMLA): what is the difference? This is a commonly asked question. And the fact that people ask about this very often suggests there might be a great deal of confusion.
The two programs share many similarities; they both protect your income when taking a family leave, but do so in very different ways. Examine four comparison categories to better understand how the two differ, yet work together:
- Paid leave versus job protected leave
- Insurance versus federal regulation
- Paperwork requirements for both
- Length of leave
Paid Leave versus Job Protection
Short term disability replaces a portion of your income should you become sick, or get injured and temporarily lose the ability to perform your work duties. It does not protect your job. Just having a policy supporting your salary while unable to work, does not mean your employer is required to hire you back when you are able to return.
The Family Medical Leave Act (FMLA) protects your job if you or someone in your family is seriously ill and requires care at home. FMLA provides unpaid leave. Your employer is not required to continue paying your salary while you are not working.
Short term disability replaces the income of the policyholder when the policyholder is unable to work. If the policyholder misses work to care for a sick family member, no benefits are paid. FMLA does protect your job under this circumstance.
Several states have modernized unemployment benefits for family leave, and allow for compensation for a compelling family reason. Caring for a sick family member is considered a compelling reason in many states, and an employee’s own disability qualifies in a subset of those states.
Insurance versus Federal Regulation
Short term disability is most often an insurance program, but it is sometimes a state regulation. FMLA is a federal regulation. The implications to you are subtle but important.
Short Term Disability is Insurance
There are three distinctive features about short term disability as an insurance program.
The first is you must buy a policy before the need arises. This is an action you must take for yourself in most cases. Some people are lucky to work for an employer who buys and pays for a policy for all employees, or all employees in a certain class. These people do nothing, and they have coverage. However, most employers don’t pay for coverage, which means you have to choose to pay for the policy.
The second is that most private short term policies exclude coverage for pre-existing conditions – typically during the first twelve months of the contract.
The third is that policies are available to groups as small as three employees, and to individuals working in certain occupations.
FMLA is a Regulation
Short term disability is a regulation in five states: California, Hawaii, New Jersey, New York, and Rhode Island. As a regulation there is nothing you need to do to get covered. Everything happens automatically. You are automatically enrolled in the program, and your employer automatically takes money from your check every month and passes your money along to the state program. There is no pre-existing condition limitation for these plans.
The Family Medical Leave Act is a federal regulation. It applies in all fifty states, and there is nothing you have to sign up for in advance of getting sick or needing to take leave. But the job protected leave is not available to all workers. The employer has to meet eligibility criteria: fifty employees for FMLA. Also workers must meet eligibility requirements based upon hours worked.
Ten states have regulations that extend or supplement what the FMLA already covers. If you work in one of those states, one or both or these regulations may apply.
Paperwork requirements are similar for FMLA and short term disability insurance. Both require that a doctor certify the serious medical condition necessitating the leave from work. Both require that the employer sign off on the leave.
The primary difference is that the FMLA paperwork goes only to your employer, while the short term disability paperwork must be submitted to the insurance carrier’s claims department.
Length of Leave
Length of leave is one area of stark contrast between the Family Medical Leave Act and short term disability insurance. FMLA allows for twelve weeks of job protected leave per year, and the clock starts ticking the first day you stop working. Short term disability will provide paid leave benefits for as long as you remain totally disabled up to the benefit duration stated in your policy, but only after first satisfying your elimination period.
The benefit duration and elimination periods are choices you make when purchasing your policy. You can choose between benefit durations lasting three, six, twelve, or twenty four months, and elimination periods ranging from zero days for an accident, to ninety days for both accidents and illnesses.
A short term disability policy with a ninety day elimination period would not begin replacing income until after you FMLA job protected leave of twelve weeks (eighty four days) was exhausted. You may no longer have a job at this point, but the insurance policy will begin supporting income to lessen the blow financially.
Are there other points to discuss about short term disability vs FMLA?