Except for overhead expense, buy–sell coverage, or other similar business disability income insurance coverage, a disability income insurance policy shall meet the following minimum standards:

(1) Provide that periodic payments that are payable at ages after sixty–two and reduced solely on the basis of age are at least fifty percent of the amounts payable immediately prior to age sixty–two or in the case of an employer group plan that has twenty or more employees, that periodic payments are actuarially equivalent regardless of age;

(2) Contain an elimination period no greater than:

(a) Ninety days in the case of coverage providing a benefit of one year or less;

(b) One hundred eighty days in the case of coverage providing a benefit of more than one year but not greater than two years;

(c) Three hundred sixty–five days in the case of coverage providing a benefit of more than two years but not greater than five years; or

(d) Seven hundred thirty days in the case of coverage providing a benefit greater than five years resulting from sickness or injury;

(3) Provide a maximum benefit period of at least six months for long–term disability income insurance and at least twelve weeks for short–term disability income insurance. However, in the case of a policy covering disability arising out of pregnancy, childbirth, or miscarriage, the maximum benefit period may be one month, except if the plan is an employer plan with fifteen or more employees, then the maximum benefit period for pregnancy, childbirth, or miscarriage may not be less than the maximum benefit period for other covered disabilities;

(4) Include no reduction in benefits because of any cost of living increase in social security or similar benefits during a benefit period;

(5) Require only one elimination period if a policy provides total disability income benefits and partial disability income benefits.

A long–term disability income insurance policy may have longer elimination periods if the policy is issued in conjunction with or supplemental to a limited duration self–insured or other short–term disability income policy. The provisions of this section do not apply to an employer plan if at least fifty percent of the covered employee’s disability income benefits are subject to federal income taxes.

Source: SL 2001, ch 276, § 4.