Will group long term disability insurance be the last great 'defined benefit' entitlement to fall?

My humble personal prediction is that in the future, companies looking to buy new benefit plans will be opting to avoid LTD and instead buy strictly Critical Illness-type plans, plus self-insuring a period of time for employees to collect income but not work. Call it a year, 2 years, whatever they can afford.

I wonder if we'll come to a point in time where there is no longer a need to define it as "disability". It might be one of the last pillars of 'defined benefit (DB)' type entitlements to cave to 'defined contribution (DC)'.

LTD is like a pension plan. It's a promise to pay you from t=today to t=age 65...if you're totally disabled from your occupation. It's subject to the same gains and pains that the good old DB pension plans faced. Markets, interest rates, the danger of a pyramid structure, and the fact that it becomes a tragedy to cut when it's been an entitlement for so long.

Here are the market forces at play that cause me to think that LTD is not sustainable in its current structure:

1. Disability has become co-mingled with workplace issues.
2. Coping skills are severely lacking in today's workforce compared to the workforce of our parents and grandparents.
3. The imminent rise of Universal Basic Income.
4. Women's Equality Movement.
5. Burnout culture (unlimited vacation, unlimited screen time, no proper down-time).

Let me explain.

• Disability has become co-mingled with workplace and home issues.

Beneplan's block of about 7,000 lives covered for long term disability sees a number of claims open and close each year. Increasingly, statistically and anecdotally, our adjudication partners are telling us that more people are coming to claim disability that also come with baggage from the workplace or their home. Conflict with a manager. Put on a performance improvement plan. Divorce from a spouse. Aging parents. And so on.

• Coping skills are severely lacking in today's workforce compared to previous generations.

Yes, I said it. I include myself in this bucket. I probably have 1/10th the grit of my war-time grandparents. I am a marshmallow compared to my immigrant parents. And yeah, I live in a time when it's becoming more normalized, for better or for worse, to openly talk about one's own anxieties. But those with no choice but to work just do it.

Statistically, there are many people in the workforce living with disabilities. But they still choose to work. There is agency in the decision to work or not work. Cancer used to be a death wish. Now, you can pop an oral chemo pill on your way to work and find 6 hours of productivity. I know people who would 100% be approved to be on disability but drag themselves to work because their ambitions are too big to put on ice.

I am increasingly seeing people stay on disability that have the physical ability to work, but something mentally is stopping them. Doctors call it being 'functional.' Yes, it's wonderful that mental health is becoming less stigmatized. But I can't help but calling a spade a spade. Mental disabilities simply did not exist on our block 20 years ago. I am hearing from our disability partners that it can be as high as 30% to 40% of claims submitted.

• The rising social acceptance of Universal Basic Income (UBI).

To be clear, UBI does have roots in conservative politics, not necessarily all liberal. Milton Friedman, a Republican economist, was a proponent of a negative income tax to simplify the "patchwork of existing social welfare schemes".

There is indeed a frictional cost to police the many entitlements that exist. Instead of spending money and time adjudicating these entitlements, could we simplify the entitlement structure, remove adjudication, and give everyone a universal flat benefit?

My friend, tech entrepreneur, and founder of CEOs for Basic Income, Floyd Marinescu, said at his TEDxWindsor talk that technology will erode the middle class. To someone like me, that's an alarm bell that LTD claims might skyrocket after many layoffs.

What would happen with private group benefits if all the ways that income is protected -- vacation above the legislated minimum, parental, and sickness top-ups -- were instead a forced employee savings plan, with an employer match? Put into a TFSA with a decent savings interest rate? What if you let people draw on it anytime? Similar to a group RRSP but for the working population.

What if you worked 12 hour days under normal circumstances, but when you adopted a child, you need to pull in 120% of your income for 3 months?

What if you need to take a break before you burned out...and instead of policing it, it would pay out without the stigma that "they are on disability but not really disabled?"

• Women's Equality Movement.

The rates of female breadwinners in a household are increasing. My mother and grandmother knew that their job was to run the home. Their job was to raise the kids and care for the home. They were not expected to care for children, work full-time, try for a promotion, go to the gym, plan children's activities, get them into good feeder programs, and more.

But today, women are taking on the impossible. They are leaders at work, managing the mental load, seeing themselves as failures if they can't breastfeed to a full year, and trying to keep it all together.

Throw in a parent with dementia or a divorce and you are throwing a match to a pile of kindling. Burnout. Disability. Which brings me to...

• Burnout culture (unlimited vacation, unlimited screen time, no proper down-time).

There are people 'living the dream': they have jobs that come with unlimited vacation, the company pays for your devices, and lets you work remotely. But what happens if people end up working more, not less? Is there more guilt associated with disconnecting? Does the brain ever stop working?

At some point, will people hit a wall?

The final consideration that may hurt this grand entitlement is that we have had historically low interest rates for a long time.

In the days of double-digit interest rates, LTD carriers could still make a profit off of the deposit float even if the claims were high. No longer. Like in a pension plan, LTD is a promise that you cannot shrug off easily. Carriers need triple-A quality investment vehicles, which are paying nowhere near what they used to pay. This is causing LTD premiums to increase overall.

Employers with no previous benefit plan are seeing this, seeing the legal consequences of mis-handling someone on LTD, saying "no thanks," and opting instead to compensate more in cash and short-term rewards. They are avoiding adding LTD completely.

Which is a shame.

There is still a need for a social safety net. There is still a need for wage-loss protection. But I question whether the packaging needs to be changed.

Do we need to remove the word "disability" and call it instead an emergency savings fund, sponsored by your employer?

This is the reason why I am so intrigued with VacationFund. It's a bright beacon of light in the world of burnout. Erica Pearson is suggesting that employers need to be trumpeting paid-paid breaks from work that come with disconnecting from email, phones, and the mental load.

So what if I offered a controversial alternative to LTD?

What if a company could buy a disability policy to protect employees after a 2 year waiting period? Or a group Critical Illness policy that paid a lump sum if someone got truly sick? And what if there was a defined contribution, forced-savings, employer-matched plan to deal with someone needing to take time off from day 1 until the 2-year mark?

Call me out...What do you think? Would you still police the fund? Would you trust employees to spend it wisely? Would you enable technology to auto-adjudicate? I'd love to hear from you.