Disability after-tax premiums in cafe plan?

[Dawn Hafner]

How are the after-tax premiums in a cafe plan used? Client currently pays all of the premium for disability, so when disability income is received it is taxable to employees.

They want to give employees the choice between being taxed on the premiums or taxed on the benefit. Can this be done through the cafeteria plan by allowing employees to pay premiums with after tax dollars? Isn't this allowing them to pick from a taxable benefit (inside the cafe plan) and a pretax benefit outside of the cafe plan? Anyone encountered this issue and have any suggestions?

[Dawn Hafner]

How are disability premiums handled in a cafe plan? Do employees choose between paying the premium on an after-tax vs. pre-tax benefit, therefore making an individual choice on if they want to risk being taxed should they ever need the disability income? What if the employer pays the premiums, do they need to decide on behalf of the entire employee group whether to include it in income or make it a tax free benefit?