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Variable Compensation in Life and Disability Plans

A plan’s definition of earnings is defined by your insurance policy. This is important for insurance plans where the enrollment volume is calculated as a percentage of salary, like disability plans and some life insurance plans. 

The most common definitions of earnings:

  • base wage
  • base wage plus bonus
  • base wage plus commission
  • base wage plus bonus and commission
  • W-2 earnings


It depends on your company's specific plan policy. This information is usually included on your plan's benefits summary or summary of benefits and coverage (SBC), under definition of earnings or earnings definition.
As a benefits administrator, you can update your plan's definition of earnings in Zenefits at renewal when setting up your life and disability plans. The current options are:
  • base wage
  • base wage plus bonus
  • base wage plus commission
  • base wage plus bonus and commission
If you’re outside of a renewal period, you can reach out to Zenefits directly to update your plan’s definition of earnings. The definition of earnings update will apply to new enrollments only; if previous enrollments need to be corrected, Zenefits can handle that too.
Base wage: The employee's salary, hourly rate converted to salary, and monthly/quarterly/annual owner's draws.

Bonus: Any bonus amount that is paid out on a recurring frequency (monthly, quarterly, annually).

Commission: Any commission amount that is paid out on a recurring frequency (monthly, quarterly, annually).

W-2: Monthly earnings as reported on the W-2 received from your employer for the prior calendar or tax year. Zenefits currently does not support W-2 earnings as an earnings definition.

This can happen if your plan doesn't have any salary-based amounts; like a life plan that offers a flat $25K volume, or incremental amounts without an earnings multiplier.

For these kinds of plans, base wage will be used as the definition of earnings.
  • Bonuses, commissions, or owner's draws that are set up as one-time payments
  • W-2 earnings
  • 1-, 2-, or 3-year averages of bonuses, commissions, owner's draws, and W-2 earnings
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