FAQ's

ORP Long-Term Disability
When an ORP participant stops active work, his or her long-term disability insurance will continue and employment will be deemed to continue if:

1. The participant is either on a sabbatical or on a leave of absence and receives at least one-quarter pay. Insurance may be continued to the end of 24 months or, if earlier, the end of leave. Or,
2. The participant is on a leave of absence approved by his or her institution's board of trustees and receives less than one-quarter pay, as long as such leave is for full-time study for an advanced degree or work in the field of education or research, such as a Fulbright Award, foundation grant, or government project. Insurance may be continued to the end of 24 months, or, if earlier, the end of leave. Or,
3. The participant is on a leave of absence for pregnancy. Insurance may be continued to the end of four months after the pregnancy ends, or, if earlier, the end of leave. Or,
4. The participant is on a family or medical leave approved by his or her institution. During such leave, insurance may be continued to the end of six months or, if later, the period required by applicable state or federal law.

Employment will not be deemed to continue and insurance cannot be continued during a sabbatical or leave of absence unless the sabbatical or the leave for the participant is set forth in a written document that is dated on or before the leave is to start and shows that the participant is scheduled to return to active work for his or her institution.
For a participant on leave, the monthly wage base will be based on the wages payable by his or her institution just prior to the start of the leave.

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ORP Group Life Insurance
When an ORP participant stops active work in an eligible class, his or her ORP group life insurance will continue and employment will be deemed to continue if:

1. The participant is either on a sabbatical or on a leave of absence and receives at least one-quarter pay. Insurance may be continued to the end of 24 months, or, if earlier, the end of leave. Or,
2. The participant is on a leave of absence approved by his or her institution's board of trustees and receives less than one-quarter pay, as long as such leave is for full-time study for an advanced degree or work in the field of education or research, such as a Fulbright Award, foundation grant, or government project. Insurance may be continued to the end of 24 months, or, if earlier, the end of leave. Or,
3. The participant is on a leave of absence for pregnancy. Insurance may be continued to the end of four months after the pregnancy ends, or, if earlier, the end of leave. Or,
4. The participant is on a leave not listed above or is retired, temporarily laid off, or transferred to a class of employees not eligible for insurance. During such a circumstance, insurance may be continued to the last day of the month in which the event began. Or,
5. The participant is disabled. (The participant's disability need not be a "total disability" as defined in the Certificate of Insurance.) During a disability, insurance may be continued to the end of 12 months after the disability began. Or,
6. The participant is on a family or medical leave approved by his or her institution. During such leave, insurance may be continued to the end of six months or, if later, the period required by applicable state or federal law.

Employment will not be deemed to continue and insurance cannot be continued during a sabbatical or leave of absence unless the sabbatical or the leave for the participant is set forth in a written document that is dated on or before the leave is to start and shows that the participant is scheduled to return to active work for his or her institution.

Generally, no. The ORP group life and long-term disability insurance policies only cover employees who are active participants in the ORP: those who are making current contributions to the plan.

However, there may be cases when a participant is called to active military duty and, while on military leave, maintains their active status in the plan. In a case like this, where the Commonwealth continues paying the related insurance premiums for an ORP participant away on active military duty, coverage under both policies may continue.

The group life insurance policy does not carry a war exclusion. So coverage would continue in full, even while a participant is in a war zone.

The long term disability policy does have a war exclusion.  However, the Standard Insurance Company (the current underwriter) has explained that they would review individual case circumstances before denying benefits to a participant who became disabled in a war zone.

This section of is intended to highlight tax issues relating to active participants, not beneficiaries and other survivors. You should not consider these notes to be tax advice of any kind. You should discuss these issues with qualified counsel.

Long Term Disability Insurance
The long term disability insurance policy provides two benefits while you are disabled. They are listed below. The tax treatment is different for each of the two benefits.

1. Monthly Income Benefit (MIB): The MIB is paid directly to each disabled participant by the insurance company.

The MIB is taxable to you as regular income by both the state and federal governments in each year that you receive this benefit. The insurance company paying the benefit reports the income to the government on behalf of the Commonwealth.

2. Monthly Retirement Plan Contributions: The disability policy makes monthly contributions directly to your retirement account when you are disabled.

These contributions are tax-deferred, just as Plan Contributions are tax-deferred when you are working. This means that no taxes are due when the contributions are made. However, you must pay regular income tax on amounts you draw from the retirement plan at any time.

Group Life Insurance
The group life insurance policy provides death benefits to your survivors. Additionally, there is a provision to pay accelerated death benefits directly to you in cases of terminal illnesses. The premiums are fully paid by the Commonwealth.

1. Death Benefits & Accelerated Death Benefits: These benefits are paid, tax-free, to either your beneficiaries or you (respectively).
2. Imputed Income: The Internal Revenue Service considers the value of employer-provided group term life insurance in excess of $50,000.00 to be imputed income for covered employees. Consequently, the value of the life insurance provided under the ORP and the basic life insurance provided by the Commonwealth through the Group Insurance Commission (GIC) can be taxable to active participants each year. The Commonwealth determines the amount of any imputed income attributable to your group life insurance coverage and includes it on Form W2 each year.

Most participants consider the taxable cost small in comparison to the total benefits provided by the Commonwealth. As sample calculation of imputed income for an ORP participant is below.

Sample Calculation: An OPR participant who is 47 years of age and has a salary of $60,000 receives one and a half times their annual wage in life insurance through the ORP life insurance plan. Accordingly, the group life insurance benefit is $90,000.

The basic life insurance ($5,000) provided by the GIC is also included in this calculation.

Based upon the Internal Revenue Service's Table 1, imputed income to the participant is $6.75 per month ($81 per year), illustrated as follows:

1. Total Employer-Provided Group Term Life Insurance:
   
   ORP Coverage = $90,000
   Basic Life Insurance from the GIC = $5,000
   Total Insurance = $95,000
2. Benefit Exceeding $50,000: $95,000 - $50,000 = $45,000
3. Taxable Value of $45,000 Life Insurance Benefit:
   
   Monthly Cost from IRS Table 1 for Person Age 47 = $.015 per $1,000 of benefit
   Number of $1,000s = 45,000/1,000 = 45
4. Taxable Imputed Income:
   
   45 x $0.15 = $6.75 per month

You should contact your tax advisor with questions about how this tax relates to your personal tax planning.

While this is a personal decision to be made by individual participants, the following notes may prove helpful in making that choice.

ORP Disability Coverage: ORP participants are automatically insured under the program’s long-term disability policy. The insurance premiums are paid by the Commonwealth as part of the program’s Employer Contribution.

GIC Disability Coverage: State employees may purchase long-term disability insurance from the GIC. Premiums are fully paid by employees. This plan is traditionally considered an important supplement to a retirement disability pension payable under the Massachusetts State Employees’ Retirement System (MSERS).

Dual Coverage Coordination: The ORP disability policy and the GIC’s disability policy both include language that offsets for the coverage from other plans (benefits from other sources).

The GIC plan’s underwriter has reported that they will assume that the full monthly income benefit will be payable by the ORP policy. This means that they will pay only the minimum benefit under the GIC plan.

The ORP plan’s underwriter has reported that they will address each case individually and not necessarily assume that the full monthly income benefit will be payable under the GIC policy, but only the minimum.

Resulting under-insurance: The result of being covered by both plans is that participants would likely find that they will have lower total monthly income benefits than expected.

Continued Retirement Plan Contributions: The dual coverage offsets do not affect the continuation of retirement plan contributions under the ORP’s disability policy.

Future Insurability: Employees who purchase the GIC disability coverage when they are first eligible are not required to prove their insurability (your good health). Purchasing this coverage after your initial eligibility lapses does require your proof of insurability. You should contact the GIC directly with any questions about this issue.

ORP participants who anticipate moving to a position in the future where they will no longer be covered the program, should carefully consider purchasing the GIC insurance when they are first eligible, obviating the need to prove their insurability at a later date.

Tax Considerations: The ORP plan administrator cannot provide tax advice for you. However, the notes below concerning income taxes on monthly income benefits may be helpful as you decide whether or not to purchase the GIC disability coverage.

Monthly income benefits from the ORP disability policy are subject to regular income taxes. This is because the Commonwealth pays the premiums.

Monthly income benefits from the GIC disability policy are not subject to regular income tax because your premiums are subject to current taxation when you pay them.