Long‐term disability plans usually cover only 60% of income.
Covering 100% is expensive and impractical; i.e., would there be an incentive for your employee to return to work?
And, because premiums are almost always employer paid, when claims are received, they are further reduced by tax withholding. That’s usually an unpleasant surprise.
Here’s a ‘trick’ to boost the value of payments.
Gross up the pay of covered individuals by the small premium amounts specific to each covered employee. The added cost is marginal but now the disability premium can be classified as employee paid.
That makes the disability payments tax‐free.