Long-term disability insurance pays a portion
of your income if you’re unable to work due to illness or injury.
The Hartford
is the LTD provider.
LTD benefits provide you
with a portion of your salary in the event you become disabled and
cannot work. If you are rendered disabled by a licensed physician, for 90 days
or more, you can apply and be considered for the LTD benefit. If approved, you would be eligible to receive
60% of your monthly earnings,
up to $15,000 depending on
the class defined.
Associates are provided
with two LTD tax options:
Option 1 — Employee Paid/Weekly
Contribution
If you pay the LTD premium with after-tax dollars,
and
you become disabled, the benefit of 60% (of your predisability wages) is NOT subject to Federal Tax. Therefore, you would receive
the full 60%
benefit.
Option 2 — Company
Paid
If you become disabled, any disability benefit
paid to you would be subject to Federal taxes. So, if the benefit paid
is 60% of your pre-disability wages, and you are in the 21% tax bracket, your net benefit check would be about 48%
of your normal gross wages.
If you are currently enrolled, during the annual Open
Enrollment period, you have the opportunity to review your current
participation in LTD and can make changes to your current LTD tax election.
Note: LTD contributory
plans are governed by IRS regulations. The
IRS has a three-year “look back” on LTD plans. If you contribute from the
inception of the policy and continue to contribute throughout the policy years, any benefit paid to you will not be subject to Federal Tax. If, however,
you change your mind during the policy period, you
will have to pay the premium for 3 full years before the benefit
is not
subject to tax. If you pay the premium for 1 or 2 years in the 3 year period, the taxable
portion is prorated accordingly.