Full Version: LTD Benefits Taxability
Are active employees over the age of 65 required to continue paying taxes on LTD benefits? Our employer pays for the premius; however, the employee pays the taxes on the premium. Once an employee reaches age 65 and is now eligible for social security benefits, do they continue to pay taxes on LTD premiums through payroll deductions?
QUOTE (Sitges98 @ Jul 29 2009, 08:36 AM) 
Are active employees over the age of 65 required to continue paying taxes on LTD benefits? Our employer pays for the premius; however, the employee pays the taxes on the premium. Once an employee reaches age 65 and is now eligible for social security benefits, do they continue to pay taxes on LTD premiums through payroll deductions?
If the employee has been taxed on the LTD premiums when paid by the employer, why are any of the employees on LTD paying taxes on the LTD benefits paid to them, regardless of age?
QUOTE (J Simmons @ Jul 29 2009, 11:57 AM)
QUOTE (Sitges98 @ Jul 29 2009, 08:36 AM)
Are active employees over the age of 65 required to continue paying taxes on LTD benefits? Our employer pays for the premius; however, the employee pays the taxes on the premium. Once an employee reaches age 65 and is now eligible for social security benefits, do they continue to pay taxes on LTD premiums through payroll deductions?
If the employee has been taxed on the LTD premiums when paid by the employer, why are any of the employees on LTD paying taxes on the LTD benefits paid to them, regardless of age?
Any of our employees that are receiving LTD benefits are not paying taxes.
If they don't pay taxes on the premiums for LTD coverage, and then become disabled and receive LTD benefits, they will pay income taxes on those benefits. This is so at any age.
LTD benefits--as an income replacement benefit for those who cannot continue working--frequently end at age 65, presumed age at which they would retire otherwise. If your group LTD policy provides does not provide benefits beyond age 65, I wonder why you'd be paying premiums for those employees over age 65 and yet working. If the group LTD policy would provide benefits beyond age 65, such as for 1 or 2 years after becoming disabled at a post-65 age, then the premiums for such coverage could either be taxable or tax-free to the employee. However, if tax-free to the over-65 employee and he or she becomes disabled and begins drawing LTD benefits, then those LTD benefits will be taxable income that person.
LTD benefits--as an income replacement benefit for those who cannot continue working--frequently end at age 65, presumed age at which they would retire otherwise. If your group LTD policy provides does not provide benefits beyond age 65, I wonder why you'd be paying premiums for those employees over age 65 and yet working. If the group LTD policy would provide benefits beyond age 65, such as for 1 or 2 years after becoming disabled at a post-65 age, then the premiums for such coverage could either be taxable or tax-free to the employee. However, if tax-free to the over-65 employee and he or she becomes disabled and begins drawing LTD benefits, then those LTD benefits will be taxable income that person.
QUOTE (J Simmons @ Jul 29 2009, 03:59 PM)
If they don't pay taxes on the premiums for LTD coverage, and then become disabled and receive LTD benefits, they will pay income taxes on those benefits. This is so at any age.
LTD benefits--as an income replacement benefit for those who cannot continue working--frequently end at age 65, presumed age at which they would retire otherwise. If your group LTD policy provides does not provide benefits beyond age 65, I wonder why you'd be paying premiums for those employees over age 65 and yet working. If the group LTD policy would provide benefits beyond age 65, such as for 1 or 2 years after becoming disabled at a post-65 age, then the premiums for such coverage could either be taxable or tax-free to the employee. However, if tax-free to the over-65 employee and he or she becomes disabled and begins drawing LTD benefits, then those LTD benefits will be taxable income that person.
LTD benefits--as an income replacement benefit for those who cannot continue working--frequently end at age 65, presumed age at which they would retire otherwise. If your group LTD policy provides does not provide benefits beyond age 65, I wonder why you'd be paying premiums for those employees over age 65 and yet working. If the group LTD policy would provide benefits beyond age 65, such as for 1 or 2 years after becoming disabled at a post-65 age, then the premiums for such coverage could either be taxable or tax-free to the employee. However, if tax-free to the over-65 employee and he or she becomes disabled and begins drawing LTD benefits, then those LTD benefits will be taxable income that person.
Thanks for your feedback.
All our active employees, regardless of age, pay taxes on the LTD premium so that, in a case where the employee would apply for LTD and get approved, they would not pay taxes on the amount payable to them. We do offer continued LTD benefits beyond the age 65; however, it will be offset by social security benefits.
You do bring a valid point in that if we do not allow LTD benefits beyond age 65, why would we pay the premium for those employees. However, we do provide LTD benefits beyond age 65.
The employee, who is over 65 and not receiving LTD benefits because he is actively working, was questioning why he is required to pay taxes on the premium. I finally was able to respond to him to let him know that since we continue to pay the premium on his behalf, he will continue to be taxed on the premium.
thanks for your insight.
This is a "lo-fi" version of our main content. To view the full version with more information, formatting and images, please click here.