ERISA: How To Keep All Your Long Term Disability Benefits
It’s a fact that most Americans are only a few paychecks away from financial disaster. Disability Income insurance offers some protection by protecting a portion of your income. Most disability plans will only cover up to about 2/3 of your gross income. However, I’ve seen some plans that cover only 40 % of your income. In an ERISA plan where the premium comes out of your paycheck, you’ll want to have your employer deduct the premium after taxes, or out of your net paycheck. The reason is that if you deduct the premium before taxes are taken out, when you have a claim, your benefit will be subject to income taxes. As you can see, if you had to pay income taxes on 40% of your income, you would be left with almost no coverage at all. For most, it is far better to pay a small amount of tax on the premium rather than having to pay full income taxes on the benefit at a time when you need all the money you can get.