National Survey Reveals Important Income Protection Needs, and Opportunities, for Employees and Their Families

FOR IMMEDIATE RELEASE

Monday, April 30, 2012

CONTACTS:

Jack Gillis, CFA, 202-737-0766

MC Guenther, Unum, 866-750-8686

NATIONAL SURVEY REVEALS IMPORTANT INCOME PROTECTION

NEEDS, AND OPPORTUNITIES, FOR EMPLOYEES AND THEIR FAMILIES

Research by CFA and Unum shows workers know little about disability insurance, despite expecting financial hardship if unable to work

Once informed about employer-sponsored coverage, almost all workers

want this insurance and are willing to pay for it

Washington, DC – In a national survey of nearly 1,200 employees, the Consumer Federation of America (CFA) and Unum learned that workers know little about group disability insurance, even important characteristics of what coverage they may have.  But when given information about this financial protection benefit, nine out of 10 employees say they want this coverage and would pay for it.

In the CFA-Unum survey,  only 13 percent of all employees say they know "a lot" about this insurance, and less than half of those who say they have coverage know how much it costs (41%) or what its benefits are (47%). When given information about disability insurance, a very large majority (90%) say they want this coverage, and nearly as many (86%) say that, if required, they would pay half of a $30 monthly premium, with more than half (56%) saying they would pay all of this premium, to gain income protection.

"Almost all workers wisely want disability insurance protection and are willing to help pay for it," said Stephen Brobeck, CFA's Executive Director.  "But since only about one-third have long-term disability insurance, there is a huge gap between worker desire for coverage and the extent of actual coverage."

Group disability insurance provides financial protection to employees unable to work because of injury or illness.  Depending on the specific plan, within one week to six months after an employee stops working, he or she begins receiving payments equal to about 60 percent of his or her income.  About one-third of workers are protected by long-term disability insurance, whose monthly premiums – paid for by the employer, employee, or some combination – usually range between $10 and $30.

Employer-sponsored disability insurance provides income protection that is not available from workers’ compensation or Social Security Disability Insurance.  Workers’ comp is available only to those employees who are injured or made ill on the job, but the large majority of injuries and illnesses causing work loss are suffered away from work.  Social Security Disability Insurance benefits average only $13,000 a year.

"The ability to earn a living – our income – is the most valuable asset we have, and protecting that asset is increasingly important,” said Thomas R. Watjen, president and CEO of Unum. “A disabling illness or injury can cause real financial hardship for many individuals and their families, and disability insurance creates a backstop against significant income loss during the period of absence, recovery and return to work.”

The high value employees place on the availability of disability insurance, and their personal desire for insurance coverage, certainly reflect the fact that most workers say they would suffer financial hardship if not able to work.  More than three-quarters of all employees (77%) say they would suffer great or moderate financial hardship if they did not work for three months because of injury or illness, with half (50%) indicating great hardship.  And more than three-quarters (78%) say they would experience great financial hardship if they did not work for 12 months.

Lower-income workers are much less likely to have access to disability insurance coverage, but are more likely to want this coverage, than are upper-income workers. Fewer than half (46%) of employees with household incomes under $25,000, but 80 percent of those with household incomes of $100,000 or more, say that their employer offers disability insurance. Yet, 72 percent of the lower-income group, but only 51 percent of the upper-income group, say that it is very important to them personally to have this insurance coverage.  And lower-income workers are nearly as willing as higher- income workers to pay for this coverage.

"As an employer, I consider group disability insurance to provide important income protection for our employees,” said Brobeck.  “This insurance complements and supplements better-known workers’ compensation and Social Security Disability Insurance programs. The Consumer Federation of America believes that consumers, most of whom rely on wages and salaries for purchasing power, would be well-served if all employers offered employees the opportunity to purchase disability insurance."

Additional highlights of the CFA-Unum survey include:

Employees Lack Knowledge About Reasons for Disability, Disability Insurance, and Their Own Insurance Coverage

Employees don’t understand the reasons for disability that result in time away from work, underestimate the extent to which workers will miss work, and know little about group disability insurance, including the coverage they may currently have.

• Nearly twice as many employees think that injuries (66%), not illnesses (34%), keep employees from work for at least three months, but the large majority of all disability claims paid are for illnesses and health conditions.
• Employees think that 25 percent of those who become disabled and are unable to work for at least three months remain disabled for at least two years.  But in actuality, it’s twice that. Half of the disabled workers who are out of work for three months remain disabled for more than two years.
• Only 13 percent of employees say they know "a lot" about group disability insurance, while just over one-third (35%) say they know only "a little." More than half (52%) say they know "not very much" or "nothing at all."
• Among employees who think they are covered, fewer than half say they know how much it costs (41%) or what the benefits are (47%), and little more than three-fifths (63%) say they know whether they "pay any or all of the monthly payments."

Employees Support Policies to Increase the Availability and Quality of Group Disability Insurance

Because employees strongly support the value of group disability insurance for all employees and for themselves personally, it is not surprising that they support policies to increase its availability and quality.

• More than three-quarters of employees (76%) say it is a good idea for employers to automatically enroll employees in a disability insurance program that these employees could decline only at the outset and annually thereafter.
• When employees are informed that small employers are least likely to offer disability insurance, a large majority (71%) favor "the federal government providing these employers a one-time tax incentive to help them create a group disability insurance option."
• More than three-quarters (77%) favor the creation of "independent standards that were used to evaluate individual employer plans."  Despite the ambiguity of the question – what are the standards and who creates and enforces them? – most employees said these standards are a good idea.

The CFA-Unum survey was administered by Opinion Research Corp International (ORC) over three weekends in late March and early April this year by cell phone and landline.  ORC interviewed 1,191 full- and part-time employees who are broadly representative of the population of all employees, then weighted the survey data to more exactly represent the characteristics of all employees.  The margin of error of the aggregate data is +/- 3 percentage points.  Additional information about the survey methodology, and the survey data themselves, are available on request from CFA.  Also available is a CFA-Unum report on the survey data, "Employee Knowledge and Attitudes About Employer-Provided Disability Insurance."

CFA is a non-profit association of nearly 300 consumer groups that was established in 1968 to advance the consumer interest through research, advocacy, and education.  Unum (NYSE: UNM) is a leading provider of employee benefits in the United States and the United Kingdom. In the future, the two organizations will seek to increase consumer, employee, employer, and policymaker understanding of group disability insurance through dissemination of these survey findings and related information.

Fact Sheet http://www.consumerfed.org/pdfs/FactSheet.CFA.UnumDisabilityInsruance.4.30.12.pdf

Study http://www.consumerfed.org/news/516

Courtesy of  CFA and Unum 

What every student should know about summer jobs and taxes

What every student should know about summer jobs and taxes 

Do you have a summer job during your time off from school? Do you know that you have to pay tax on the
money you’re earning from that job? Here are a few tips about earning money and paying taxes.

• Be sure you fill out Form W-4, Employee’s Withholding Allowance Certificate. Your boss uses this form to determine the amount of tax to withhold from your paycheck. If you have more than one job, you should
make sure all your employers are withholding enough taxes to cover your total income tax liability. To
ensure your withholding is correct, visit the IRS Withholding Calculator on IRS.gov.

• When determining how much income to report, include all the money you earned while working. This
usually means wages, salaries and tips.

• In some jobs, like waiting tables, you may receive tips from customers. Tips are considered income, just like your hourly wages. Therefore, you must pay tax on them. This includes tips customers give you directly, tips customers charge on credit cards and your share of the tips you split with your co-workers. For more
information about reporting your tips, read Publication 531, Reporting Tip Income.

• Are you doing odd jobs like babysitting and lawn mowing? These jobs are considered self-employment, and the money you earn is taxable. It’s important to know whether you are considered self-employed or a wageearner. You can get more information about this on the IRS website.

• If you have net income* of $400 or more from self-employment, you will have to pay self-employment tax.
This pays for your Social Security and Medicare benefits, which are normally paid for by withholding from
wages. The self-employment tax is figured on Form 1040, Schedule SE. *Net income is the money you
earned after any deductions — such as business expenses — have been subtracted.

• Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax. See the
special rules that apply to services you perform as a newspaper carrier or distributor if you are considered a
direct seller and should be treated as self-employed for federal tax purposes.

• If you are in the ROTC and participated in advanced training, the subsistence allowance you received is
not taxable. However, active duty pay — such as pay received during summer advanced camp — is
taxable.

Now that you’re working this summer, you may be wondering whether you’ll have to file a tax return. The
answer depends on a number of factors  from how much you’re making to whether or not your parents claim you as their dependent. You can read the rules and dollar thresholds in Publication 501, Exemptions, Standard Deduction and Filing Information, or use the IRS interactive tool to find out.
To learn more about taxes, including how you might qualify for a tax credit to pay for college or other qualifying education, visit Tax Information for Students on IRS.gov.
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Resources

You Tube video – Income from summer or part time job is taxable and may even get you a refund

• Taxable income for students

• Tax Information for Students    

• IRS Withholding Calculator

• Understanding Taxes – The Hows of Taxes shows you how to apply tax principles, while the Whys of Taxes explains tax history and theory.

Courtesy of IRS Outreach Corner

Saving Tips

Southeast Rural Community Assistance Project's Savings Tips

·         Save your loose change. Putting aside fifty cents a day over the course of a year will allow you to save nearly 40% of a $500 emergency fund.

·         Keep track of your spending. At least once a month, use credit card, checking, and other records to review what you’ve purchased. Then, ask yourself if it makes sense to reallocate some of this spending to an emergency savings account.

·         Never purchase expensive items on impulse. Think over each expensive purchase for at least 24 hours. Acting on this principle will mean you have far fewer regrets about impulse purchases, and far more money for emergency savings.

·         Use debit and credit cards prudently. To minimize interest charges, try to limit credit card purchases to those you can pay off in full at the end of the month. If you use a debit card, don’t rely on an overdraft feature to spend money you don’t have. With either approach, you’ll have more money available for emergency savings.

·         Are you looking for an effective way to establish a budget? Beginning on the first day of a new month, get a receipt for everything you purchase. Stack and review receipts at the end of the month, and you will clearly be able to see where your money is going.

·         It pays to practice preventative dental care, since a good cleaning routine helps prevent fillings, root canals, and dental crowns, which are expensive and no fun.

·         Most people don’t track what they spend and may not realize when expenses add up to more than their budget can handle. To keep track of what I spend, I put what I think I should spend for the month on transportation, food, entertainment, etc., into envelopes. This helps me avoid buying things I don’t need, and what’s left over goes into saving.

·         Take advantage of discounts and/or incentive programs provided through your employer. For example, the company I work for offers discounted rates for computers, fitness center memberships, movie tickets and passes to summer festivals. Check your corporate intranet or talk to your human resources representative. And don’t forget the best deal of all – investing in your 401 (k)!

·         One way to establish a savings discipline is to “save” an amount equal to whatever is spent on nonessential indulgences. Put a matching amount in a cookie jar for expenditures for beer, wine, cigarettes, designer coffee, etc. If you can’t afford to save the matching amount, you can’t afford the $4 super almond low-fat latte.

·         Take the amount the item costs and divide it into your hourly wage. If it’s a $50 pair of shoes and you make $10 an hour, ask yourself, are those shoes really worth five long hours of work? It helps keep things in perspective.

·         Aim for short-term savings goals, such as setting aside $20 a week or month rather than long term savings goals, such as $200 over a year. People save more successfully when they keep the short-term goal in sight.

·         Save money by buying items online, in bulk. Some companies even offer free shipping on large orders. Clearance items are sometimes available, and good savings can be found on non-perishable groceries and diapers. This saves time and money!

Courtesy of Southeast Rural Community Assistance Project, Inc.

Stair-Step Spending

We often talk a great deal about the need to save. I wanted to share an article by Syble Soloman on "Stair-Step Spending" which also reminds us to enjoy life but be financially frugal too. This is also good information when planning family vacations! For full story click here.

Courtesy of Inspired Savings Syble

Getting Gassed!

Getting Gassed!

If you are like the average American, you use your car to transport yourself almost everywhere.  You drive to work, to school, to buy groceries, even for a quick getaway.  According to the US Department of Transportation Federal Highway Administration, the Average American travels an estimated 13,476 miles each year. 

As the cost of gasoline continues to be volatile, families are feeling the pinch on their monthly spending plans.  It isn’t uncommon to hear around the water cooler that a fill up is costing $60, $70 or even $80 at the pump.  You are probably feeling it too.

To find out what this really means for the household spending plan, Virginia Saves took a look at how much an increase of a gallon of gas might cost your family.  We analyzed various price increments in the cost of gasoline compared with the miles per gallon your car might get.  Certainly, if you can go farther on a gallon of gas, your costs are lower.  Assuming that we actually drive the average distances outlined above, if a gallon of gas increases $1.00 you could see a hit to your annual household spending of close to $900!  That is almost $75 each month.  The average driver has seen an increase this year alone of $20 per month in the cost of gasoline.

Price Increase	MPG/Cost Increase Per Year
	15	20	25	30
$       0.10	$          89.84	$    67.38	$    53.90	$    44.92
$       0.25	$        224.60	$  168.45	$  134.76	$  112.30
$       0.50	$        449.20	$  336.90	$  269.52	$  224.60
$       1.00	$        898.40	$  673.80	$  539.04	$  449.20

With extra dollars taken away from your budget to pay for gas, we need to be all the more vigilant in maintaining control of expenses.  This money could have been spent on increasing your savings, reducing your debt or paying for the other components of your monthly expenses.  Here are some ideas to help you save more at the pump discovered at www.fueleconomy.gov

1.       Drive sensibly: can increase your MPG 5 – 33% (.18 – 1.20/gallon)

2.       Observe the speed limit:  can increase your MPG 7 - 23% (.26-.84/gallon)

3.       Keep your car maintained:  can increase your MPG up to 4% (.15/gallon)

4.       Maintain properly inflated tires: can increase your fuel MPG up to 3% (.11/gallon)

5.       Use recommended grade of motor oil: can increase your fuel MPG up to 2% (.04/gallon)

6.       Avoid unnecessary idling: can cost you up to 3 cents per minute without AC and 4 cents per minute with AC on.

7.       Remove unnecessary weight from your car:  unloading 100 lbs could save you .04 - .07 per gallon

8.       When replacing your vehicle look at the fuel economy rating to get more MPG and save you $$$.

9.       Where possible combine trips to cut down on miles travelled.  Pick up the groceries on the way home from work rather than making a special trip. 

10.   Walk or bicycle where possible.  This is a great way to cut costs and improve your physique!

Tell us how you are coping with the increased costs in fuel and how you are adjusting your spending or activities to make ends meet!  Your ideas can increase savings for everyone!

Courtesy of Lori Irwin