Employers of Large Organizations – over 500 Employees, in majority cases will insure Life & Long Term Disability (LTD) for their employee’s . Life Insurance is deemed to be inappropriate for self-insurance because benefit amounts in excess of $10,000 are taxable to the beneficiary when provided on a self-insured basis. Legislation prohibiting self-insurance of LTD in the federal jurisdiction further limits the use of self-insurance.
These Groups may be insured on Refund Accounting or, self-insure – using an ASO arrangement for the Health, Dental & Short Term Disability (STD) / Weekly Indemnity (WI). The self-insured plans with an element of insurance can include Stop Loss Coverage, Large Amount Pooling (LAP) – this caps the individual claims to a specified amount, Aggregate stop-loss pooling – the employer is protected if overall claims exceed an agreed upon level expressed as a percentage of the premium.
The Employer pays a pooling charge (pooling premium) to the insurer, for assuming the risk of having to pay the claims above the pooling threshold.