Each employer chooses whether to offer the FCMM Long Term Disability Plan as an employee benefit (paid by employer) or as payroll deduction (employee pays premium by payroll deduction). In both cases, the employer must send in the premium payment to FCMM.
What’s the difference? In the event of disability, the source of the premium payment determines the tax status of benefits. Benefit payments are taxable income when the coverage has been provided as a non-taxed employee benefit. Benefit payments are considered non-taxable income when the coverage has been paid by the employee from taxable income via payroll deduction.
Some employers seek to ensure that all employees are covered by paying the premium as a benefit. When the LTD Plan is offered as a payroll deduction, employees must be given the option to not participate.
Recently, another way of administering the payroll deduction has become widely practiced and is available for FCMM LTD Plan employers to implement. Referred to as a “Tax Choice” plan, the employer may add the amount of premiums to the employee’s gross income and then payroll-deduct that same amount. The employee’s net expense, then, is for the taxes on the premium. Contact FCMM to learn more.
