LTD Plan Setup where company pays premiums on an After-tax basis

I am attempting to setup a LTD plan, yet our company has agreed to pay the premiums on an after-tax basis so if the employee ends up going on LTD, their paid benefit won't ultimately be subject to income tax. It seems like to be accurate for each employee, it would have to work like imputed income, yet the BN150 is specifically Life Insurance Reportable Income only.

The other consideration was to go ahead and include Employee Contribution piece in the premium setup, then turn around and upload an offset pay code. Just uncertain whether this method would be entirely accurate or acceptable since it wouldn't be based on their current W-4 elections.

Has anyone else encountered this challenge?

[Updated on 7/18/2014 11:54 AM]

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Comments

kellene-metzger-moris

If I'm understanding you correctly, you're just setting up a company paid benefit plan. However, I'm not familiar with an LTD benefit that pays out 3 x annual salary. Typically a disability benefit is a benefit that pays a certain percentage (even if it's 100%) of an employee's base salary and that benefit is typically sent to the insured on a monthly basis so the monthly check would be whatever percentage the benefit is of the employee's annual salary divided by 12. For example, our company pays the premium for a plan that pays a benefit of 40% of an employee's monthly salary because our LTD payments are issued once a month. This means the employee receives a monthly check that equals 40% of their annual salary divided by 12 months.

There is no imputed income involved at all. It's just a company paid benefit plan that the company pays premiums on an aftertax basis so the employee has no tax liability on the benefit paid.

Our plan is set up as Coverage Type 2 and Contribution Type 4. On the coverage tab (bn17.3) we have 40% in the percent field at the bottom of that screen and on the limit is $30,000 because we do have a maximum monthly benefit amount of $2,500. On the contrib (BN18.4) the contribution tax type is N (no EE contrib), in the Calculation on BN18.4 we have S for salary in the Coverage or Salary field and 100.00 in the Cost Per field because our disability carrier's premium is based on the cost per $100. We have a salary rate table set up on BN02.2 where you enter the beginning salary amount (we have 1) and ending salary amt (we have 99999999). On BN18.4, you just select the correct rate table (the one you set up on BN02.2 for the plan).

I apologize for all the details above if you truly have a disability plan that pays a flat 3 x salary when someone is out on LTD. I've just never heard of such a thing.

Best of luck!

Tami

kellene-metzger-moris

I forgot to add that on BN02.2, on the same line you enter the premium amount. Keep in mind, the way you determine the amount to enter here is based on what you selected in the Cov or Salary field on BN18.4 and the decimal placement is crucial! Also, in the criteria (BN18.8) screen we had to enter a maximum of $75,000 as that's the salary amount for which an employee would cap out at the maximum monthly benefit. You certainly don't want to pay premiums on a salary higher than the maximum benefit payable amount. Again, I apologize for all the detail, especially if I took you down the wrong path. I just know how frustrating it can be when trying to figure out how to set up the different types of benefit plans and I've been down your road, alone, and had to learn the hard way.

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