John has worked for XYZ co. for a few years, last year he was injured and has been out on Long-term disability. Recently he realized that the benefit he was receiving was less than what his salary would have allowed for. A qui...ck phone call to his insurer and John quickly confirmed that his payment was based on his reported income from 2 years ago. That posed a problem since John had earned a significant raise since his income was last reported and his subsequent disability claim.
Although his plan sponsor was required to complete supporting documentation for his claim, his actual salary reported on the sponsor statement was not adjusted. Salary updates are required to be reported to an insurer when they occur and the employee is actively at work. In this case John was on LTD, and is considered NAAW, therefore the insurer would not adjust his earnings to reflect his raise and paid a benefit based on the plan sponsors last salary update.
The lesson for plan sponsors....be diligent in your administration. If you cannot commit to self-administration, learn how your advisor can help. The lesson for plan members...when there is a change to your employment status ie promotion or raise etc...always ask your admin to ensure the group benefit provider is updated.