401(k) Disability Protection Programs

Some employers offer 401(k) disability protection programs for your 401(k) savings in addition to long-term disability (LTD) coverage. Traditional disability insurance replaces a portion of your working income if you become disabled. However, traditional LTD insurance does not provide the ability to set aside 401(k) savings for your future if you are disabled and can no longer work. Some employers offer the ability to purchase 401(k) disability protection, which can help you continue to build 401(k) savings even if you are unable to work.

If you are in a position where you need to consider filing for long-term disability insurance benefits or are already on claim with your long-term disability insurance carrier, you should review your employer plan documents to determine if you also have 401(k) disability protection. Or perhaps you may be reading this article because you are deciding whether to buy such coverage made available to you by your employer.

How 401(K) Disability Protection Programs Work

Such coverage is usually optional for which you are required to pay an additional premium. There are also several coverage options such as purchasing coverage for your own before-tax contributions, your employers match and any other employer automatic contributions. Often times you can elect one, all, or any combination of these contributions. Your enrollment in such coverage will typically commence during an “enrollment period,” usually at the end of a calendar year with the coverage commencing on January 1st of the following year.

The insurance provides you with protection in the event you become disabled in the period for which you have purchased the insurance. Premiums for coverage are based on your age and on the dollar amount of the contributions you insure. Similar to long-term disability income replacement coverage, evidence of insurability is usually not required. However, just like your group long-term disability coverage, there is likely a “preexisting exclusion” found within the coverage.

This type of coverage for protection of 401(k) contributions in the event of disability is rarely seen but it does exist. If you have submitted a claim because of your disabled status, and been denied, please do not hesitate to contact an attorney to discuss your options. The lawyers and staff at McDermott Law, LLC are available to answer your questions, usually without charge for an initial review.