If an employee is injured so that they cannot work, the insurance pays out a cash benefit directly to the employee. Medical costs are not covered under this policy and are paid out-of-pocket by the employee. If the employee chooses, they can use the cash benefit toward medical expenses.
Employers can cover the cost of disability insurance for employees in two ways.
Purchase a disability policy
Establish a self-insured fund
Many employers elect to purchase a policy from a New York State approved list of providers and pay premiums directly to the insurance carrier. Employers may pay the entire premium or choose to have employees contribute to the coverage. Employees contribute through payroll deduction a percentage of ½ of 1% of their paid wages but no more than 60 cents per week. Of course, the employer may waive all employee contributions. The business bears the cost of providing benefits over the amount collected from employees.
A large business may choose to self-insure by applying to the State Chair for approval as a self-insured employer. Once approved, the business deposits securities or files a surety bond.
Whichever option your business chooses, you must comply with the law and implement disability benefits for employees.
Organizations like religious, charitable, or educational institutions that operate on a non-profit basis are also required to provide disability benefits in the same manner if they employ one or more individuals.
Your business as the employer covers one or more employees who work for you in each 30 day period during a calendar year. After 30 days of employment, you as the business much cover the employees. Your business is called a “covered” employer.
Employees who change jobs from one “covered” employer to another are covered from the first day on the job without the 30 day waiting period. In addition, an eligible employee does not lose disability protection during the first 26 weeks of unemployment if they are claiming unemployment benefits.
Domestic workers who work in the home are also protected under the New York disability benefits law. This means you must provide disability benefits for home workers even if you do not personally consider your home a business.
New York State Disability Law provides for a number of instances where employees are not required to be covered. Check the law if you feel your business has workers who are exempt from coverage, for example: minor children, ministers and rabbis, railroad workers, corporate officers who hold majority stock positions, and others.
Benefits are paid to disabled workers either through the insurance provider or through the self-insured funds of the employer.
The benefit amount is 50% of the claimant’s average weekly wage based on the last eight weeks of employment up to the maximum benefit of $170 a week after a 7-day waiting period. The benefit is paid for a maximum of 26 weeks during a consecutive 52-week (one year) period.
In addition, the business must supply a Statement of Rights under the Disability Law to each worker who has been disabled over seven days. This Statement must be supplied within five days after the employer learns of the disability.
Employers, including those who employ home workers, suffer penalties if they are out of compliance with the New York disability benefits law.
The insurance Board imposes a penalty of ½ of one percent of the employer’s entire payroll during the period of noncompliance. In addition, there is a $500 fine for each period of noncompliance. (Section 220 (2) of the Disability Benefits Law)
Failure to secure required disability benefits insurance is a misdemeanor. The punishment is a minimum fine of $100 up to $500 or imprisonment for up to one year or both. A second violation within five years results in steeper fines of not less than $250 or more than $1,250. A third violation can result in a fine up to $2,500. (Section 220 (1) of the Disability Benefits Law)
In addition to the above penalties, the employer is liable for either the total value of any disability benefits claims paid by the State under the Special Fund for Disability Benefits while the employer was noncompliant. Or, the employer is liable for one percent of the employer’s entire payroll during the period of noncompliance, whichever sum is greater.
As you can see, not complying with disability benefits law in the State of New York can result in significant financial fines in addition to the possibility of serving time in jail.