Nora's Two Disability Policies and the 30-Hour Line
Nora, 46, is a dental hygienist at a 22-employee practice in Reno. The group medical plan is fully insured with a $2,000 deductible and 80/20 coinsurance to a $6,000 out-of-pocket maximum; she pays 30% of the premium. The firm pays the full premium for group long-term disability: 60% of her $78,000 base salary after 90 days, and the plan reduces benefits by Social Security and workers' compensation. Nora also owns an individual DI policy she bought herself: $2,000 a month, 60-day elimination, own-occupation for 24 months then any-occupation, with a residual disability rider. She fell and injured her wrist and shoulder, missed 14 months of work, then returned part-time at $46,800 a year. She has been approved for $1,900 a month of SSDI.
1. Compute the monthly income Nora receives in month 5 and identify which dollars are taxable.
Read the worked answer
Month 5: both policies are paying. The group plan's 90-day elimination and the individual policy's 60-day elimination have both run.
- Group LTD. 60% of $78,000 = $46,800 a year = $3,900 a month. Reduced by the $1,900 SSDI award = $2,000 a month. Because the employer pays 100% of the premium, the benefit is taxable as wages; at a 22% bracket that is about $440 of tax, leaving roughly $1,560.
- Individual DI. $2,000 a month, with no offset shown in the contract as described. She paid the premium with after-tax dollars, so the benefit is tax-free.
Total: about $3,560 a month after tax, against $6,500 of gross pay - roughly 55% of gross but closer to 65-70% of take-home, which is inside the range a well-built disability plan targets. The tax-free individual benefit is doing most of the work; that is why premium source matters more than the face amount.
Two things to verify, not assume:
- Whether the individual policy has a Social Security offset rider. If it does, the $2,000 drops by some or all of the SSDI award and total income falls toward $2,000-$2,500.
- Whether the residual rider requires a minimum loss (commonly 15-20%) before it pays anything.
Always read the contract conditions page rather than relying on the agent's summary.
2. In month 15 she is back part-time at 60% of her prior income. Which policy still pays, how much, and what changes later?
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Month 15 is a question about the definition of disability, not the dollar amount.
- Individual policy - paying, now as residual. She is 14 months in, so she is still inside the 24-month own-occupation period and still cannot perform the substantial duties of a dental hygienist. Income fell from $78,000 to $46,800, a 40% loss. Under a residual rider requiring a 20% loss, she qualifies and the benefit is proportional: 40% x $2,000 = $800 a month, tax-free. Her own occupation is the benchmark, so part-time work does not disqualify her.
- Group LTD - the cliff is at month 24. At month 15 the group contract still measures her against her own occupation, so it continues to pay, reduced by SSDI and by any partial-disability offset for her part-time earnings (verify the plan's definition of partial disability). At month 24 the test changes to any occupation for which she is reasonably fitted by education, training, and experience - and a 60% part-time hygiene schedule is the evidence the insurer will use to terminate the claim.
- SSDI. Returning to work triggers the trial work period: she can keep benefits for up to nine months of earnings above the threshold, so the $1,900 does not stop immediately, but she must report the earnings.
Advice: get the physician's restrictions in writing and document the loss of income month by month. The gap between the two definitions at month 24 is where this claim will be decided, not at month 15.
3. If her hours drop below 30 a week, what happens to her medical coverage?
Read the worked answer
She is at the edge of the employer-mandate line, and the answer depends on the plan document, not on how she feels.
- Full-time status. Under ACA rules, 30 hours a week (or 130 hours a month) is full-time. At 22 employees the practice is a small-group employer, and eligibility for part-time staff depends entirely on how the plan defines it - many small-group plans cover only 30+ hour employees.
- Measurement matters more than the current week. If she was full-time during the look-back period, she remains benefit-eligible through the corresponding stability period even after her hours fall. Check the measurement, administrative, and stability periods before anyone tells her the coverage is gone.
- If coverage does end, it is a COBRA event. The practice has 20 or more employees, so federal COBRA applies: 18 months of continuation at up to 102% of the premium, with the plan's 44-day notice obligation and her 60-day election window. She pays the full premium - which is exactly why the tax-free individual disability benefit matters.
- Re-entry. Loss of other coverage is a HIPAA special enrollment event, so if she later returns to 30+ hours she can re-enroll outside open enrollment, generally within 30 days of the triggering event.
Do next: pull the plan document and SPD, confirm the hours definition and the current measurement period, and mail the COBRA notice the day coverage actually terminates - not after the election window has closed.