Employers have a new opportunity to boost financial wellness among employees following a recent Department of Labor decision, expanding auto-enrollment programs to disability insurance plans.
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“The department’s action will remove a barrier many employers have faced to offering workers this vital form of paycheck protection, while also ensuring workers maintain the freedom to opt-out of the plan,” says Susan Neely, president and CEO of the American Council of Life Insurers (ACLI).
Disability income insurance protects a worker’s salary, usually an individual’s most valuable asset, by continuing to pay a portion of income in the event of hardship, Neely adds. At the same time, disability income insurance also plays an important role in reducing the demand on the government for assistance due to an illness or injury.
More than 43% of Americans don’t have enough liquid savings to cover three months of income at the poverty level, according to Prosperity Now, a Washington D.C.-based nonprofit that studies financial security.
Tuesday’s announcement is a tremendous milestone to expand coverage to the more than 50 million individuals (per ACLI) who don’t have disability income insurance, which can close the liquid asset poverty gap, says Jamie Kalamarides, president of Prudential Group Insurance.
This move extends auto-enrollment, a proven financial wellness solution, from 401(k)s to disability income insurance in the workplace, he adds, noting the increased engagement when auto enrollment is applied.
“Employers will now have opportunity to automatically enroll workers into disability income insurance with the opportunity to opt-out if they choose not to take coverage,” Kalamarides notes. “When used in 401(k)s, this approach increases worker adoption from the mid-70% to the high 90%.”
In 2017, disability income insurers paid over $14 billion in long-term claims and provided coverage to more than 49 million people, according to ACLI.
