Costs/Premium Payments

Depending upon your benefits, your employer may pay the full premium or even share some of the cost with you. If you do not receive this coverage in your benefits package, you may purchase it through your employer.

Tax Implications

The following are general guidelines for tax purposes. For further information, please contact your benefits administrator

Who pays the disability insurance premiums?

Is the disability benefit taxable when received?

Employer pays 100% of the disability premiums with pre-tax dollars Yes

Employer pays 100% of the disability premiums with after-tax dollars (i.e., premiums paid by employer reported as imputed income on employee’s Form W-2)

No
Employee pays 100% of the disability premiums with pre-tax dollars Yes
Employee pays 100% of the disability premiums with after-tax dollars No

Employers can give their employees the option to treat disability premiums as

  • Non-taxable compensation (pre-tax) resulting in a taxable disability benefit
  • Taxable compensation (post-tax) resulting in a non-taxable disability benefit

Employees must make the election prior to the start of the calendar year or, if new employee, prior to enrolling in the disability plan.

An employer does not have to give their employee a choice.

Check with payroll administrator / tax consultants for proper payroll processing and Form W-2 tax reporting.

 

Policy Number: CNYEX01112
Disability Insurance Disclaimer