RI Temporary Disability Costs Among Highest in the Country
Wednesday, May 01, 2013
Rhode Island has one of the highest costs for temporary disability insurance (TDI) in the country and is one of only five states that requires employees to carry TDI through a state-sponsored program.
100% Employee funded
The TDI program in Rhode Island is financed entirely by employee payroll deductions. Employees pay into TDI and have it available to them if they should become temporarily disabled. The current withholding rate as of January 1, 2013 in Rhode Island is 1.2% of an employee’s first $61,400 in earnings or $736 per year.
“Rhode Island and New Jersey are two of only five states in the nation that handle TDI this way,” said Moderate Party leader, Kenneth Block. “Rhode Island employees are paying twice the amount than employees in New Jersey. This is a further burden to the middle class.”
Rhode Island joins New Jersey, New York, California and Hawaii in providing state-sponsored TDI to its employees.
The program in New Jersey is structured differently than in Rhode Island. In New Jersey, both the employee and employer contribute to the state’s TDI program, lowering out-of-pocket costs for its workers.
For 2013, in New Jersey, workers contribute .0036 percent on the first $30,900 (taxable wage base) in covered wages earned during the calendar year. The maximum worker contribution is $111.24. The maximum shared contribution between employer and employee in New Jersey is $342.99 annually.
Rhode Island's employee contribution still higher.
California has a base rate lower than Rhode Island but allows for a larger wage contribution cap. Although the rate of withholding in California for 2013 is less than Rhode Island at 1.0 percent, the maximum withholding for each employee is based on a taxable wage limit of $100,880 or $1008.80 per year.
“As an employer in another state, I could purchase insurance at an annual rate of $300,” said Block. “In Rhode Island it is a recurring $700 cost for every employee who makes $60,000 a year. The only other state that is higher is California. This is a tremendous fixed cost to each employee. It’s a big chunk of discretionary money.”
According to Block, who recently presented his findings to multiple general assembly committees and the Speaker of the House’s staff, Rhode Island’s TDI system is broken due not only to high costs, but the exorbitant number of people taking advantage of the system.
Number of active participants using the system is high.
The Department of Labor and Training, 2011 annual report revealed that 35,836 Rhode Islanders received TDI payments during the year out of 393,000 wage earners who paid into the fund. The number, at nearly ten percent (9.11%) was almost three times that of New Jersey’s three percent. The average duration of TDI pay to each individual was 11.2 weeks, over New Jersey’s almost nine percent (8.9%).
“The number of Rhode Islanders who use the system is extremely high,” said Block. “Either we have an unhealthy workforce or there is an issue with the system being used by people who don’t need it.”
According to WeCareRI.org., seventy-eight percent (78%) of Rhode Island’s workforce or private sector employees are covered by temporary disability insurance.
The non-profit organization currently supports a proposed expansion of the system through legislation put forth by Senator Gayle Goldin (D-Dist 3, Providence)
Goldin recommends adding Family Leave to the TDI system.
“The time for paid family leave has come; 20 years after the signing of FMLA, Rhode Island is ready for a state program that cares for workers while supporting business.” said Senator Goldin. “Life is filled with unexpected events, and all of us, from minimum wage workers to top executives, have experienced the push-pull between work responsibilities and someone in our families needing us. Paid family leave is a cost-effective way to give employees the time to balance family and work responsibilities without jeopardizing their economic security.”
Senator Goldin supports adding paid Family Leave time to the TDI program at an increase in cost to the employee.
“The program would cover parental leave for up to eight weeks - maternity leave, parental leave, time to spend with an adopted or naturally born child, and care for elderly or injured family members.
“This legislation would mean each worker pays a little bit more, but, in return, would be protected from wage loss should a family member need his or her care,” said WeCareRI on their legislative fact sheet.
Ken Block agreed with the Senator in part.
“The legislation is good as to mother’s rights, women’s rights, family leave, but the TDI system should be fixed first. We need to fix the high cost of the program. Every other state, outside of the five allows employees to purchase private insurance. We need to reduce costs to consumers and bring down the number of people using the system.”
The numbers in Rhode Island have showed some improvement since 2010.
The total number of claims in Rhode Island in 2011 was 40,828, down 1.5 perent (1.5%) from 2010. The numbers also declined in 2012 at 40,474 total claims a reduction of 0.9 percent.
“Both the total number of claims and the total number of eligible claims changed by less than one percent, so I would actually characterize claim volume as stable over the past two years,” said Laura Hart, spokesperson for the Rhode Island Department of Labor and Training.
“The average TDI cost per worker was $427 in 2011 and is expected to be $408 for 2012 (numbers are not finalized for 2012 yet),”said Hart.
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