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After-Tax LTD Premiums


Guest kredlin
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Guest kredlin

Can an employer require its employees to participate in a long-term disability plan if the employer pays the premiums, but then imputes the premium amount as income to employees on a taxable basis? In other words, the employees will have to pay income tax on the value of the premiums.

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From my experience, most employers that do gross the benefit up also take into consideration the tax consequences. For example, if the cost of premium is $400 annually, the employer will actually gross the employee's salary up by say $500 or $550.

If the employer does not take taxes into consideration, I then would say that no, it cannot require employees to take the coverage since there is technically some cost to the employee. With that being said, I think proper communication would make this a no brainer to any employee regardless of the slight tax consequence. What kind of knucklehead wouldn't take an employer sponsored LTD plan in which the benefit was going to be non-taxable if ever used for the slight cost of a couple more dollars a month in taxes? Then again, I know they're out there. :)

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