LTD settlement through mediation how taxed?

[Guest lindy]

When a person has a LTD plan under ERISA where 50/50% premiums are split and the coverage is elective from employee, and these premiums show up on your pay stub as AFTER TAX, how is a lump sum settlement taxed or not taxed?

On my W-2 it only shows the Pre-tax items under the Section 125 and being minus amounts from the gross. I see nothing where my LTD were put. Please help me understand. Thanks so much.

I know that if damages are compensatory there is no tax. BUT, how does this premium paid by 50/50% fit in? or does it?

Boy, my sleep deprevation is showing. Sorry.

[Moe Howard]

Are you saying that you pay 1/2 the premiums via after-tax withholding and your employer pays 1/2 ?

Are you also saying that the 1/2 paid by your employer is not reported as taxable income to you on your W-2 ?

If the above are both true, then you are taxed on 1/2 of the LTD disability payments that you receive. Even if paid to you in settlement or under court order.

[Guest lindy]

Moe,

Yes to all of your questions. You are right on! I have employed a tax attorney to do all of this... It is the best way to go. That way no surprises in any way.

Have a great weekend.