Congresswoman Eleanor Holmes Norton (D-DC) has reintroduced the Federal Employee Short-Term Disability Insurance Act (H.R. 7337) which would give federal employees an option to purchase a short-term disability insurance plan through the federal government.
The bill has been introduced six times in the past dating back to 2011. It was last introduced in 2022.
The legislation would allow federal employees to purchase a short-term disability plan for up to one year to replace a portion of lost income due to a non-work-related injury, illness, or pregnancy.
The amount of benefits would be equal to the lesser of 70% of the employee’s annual rate of pay, excluding bonuses, at the time of the injury or disability or 70% of the maximum rate of basic pay provided for grade GS-15 of the General Schedule.
There is a catch, however. Federal employees would be responsible for paying 100% of the premiums. Norton says the benefit to the federal workforce would be that the federal government could obtain group rates that would likely be cheaper than open market rates.
When she last introduced the bill, she said, “There is every reason to allow our federal employees to take advantage of the federal government’s purchasing power to obtain the most reasonable price if they choose to purchase short-term disability coverage on their own, at no cost to the federal government.”
Considering how poorly the bill has fared in Congress in the past, it is unlikely to fare any better now. What then could federal employees do to cover their expenses in the event of an unforeseen emergency that leaves them without income for a short time?
Many financial advisors recommend that everyone have an emergency fund. Typically it is recommended that everyone have enough set aside in a savings account to cover 3-6 months of household expenses for emergencies. Depending on one’s circumstances, this could be an even larger amount, i.e. enough to cover up to one year. Having adequate savings in an emergency fund would take the place of short-term disability insurance without the added expense or hassle that might come with carrying the insurance policy.
Some financial advisors go so far as to recommend that people not buy short-term disability insurance policies. Personal finance expert Dave Ramsey, for instance, says that it is generally not a good deal and is unnecessary if one has a suitable emergency fund. His website states:
Short-term disability insurance is exactly that: short. Payments only last for a few months to a year. The elimination period is normally around two weeks—so you can get your payout faster than with long-term coverage. But when it comes to cost, short-term premiums are around the same (but usually more expensive) than long-term premiums.
Basically, unless your employer is offering short-term coverage free of charge to you, don’t get it. You can put together your own short-term disability coverage by saving 3–6 months of expenses in an emergency fund! If you get sick or injured and have to take time off work for a few months, your savings can fill in the gaps until you get back on your feet.
One obvious example as to why federal employees need an emergency fund is in the event of a partial government shutdown. Although a law is in place that guarantees back pay for the duration of a shutdown, it still is likely to delay federal employees’ paychecks for a short time, so they need to be able to buy food and pay bills until their pay is restored.
