Who Pays Disability?

Who pays for short term and long term disability insurance? If you’re an employer, it’s pretty much your choice. As an employer, you can opt to pay for your employee’s disability insurance, have them pay for it or share the cost. No matter what your choice is, there will be tax implications for your employees, should they need to go on disability.

As discussed in this article, employees are taxed on disability coverage they receive if it’s employer-paid but not taxed on disability coverage they receive if they pay the premiums through a Section 125 cafeteria plan. While you think that an older workforce is more likely to go out on disability, younger people are just as likely to suffer an illness or injury that leaves them unable to work for an extended time period.

Knowing what your workforce wants, how much they can afford and how much you can afford in benefits can help you decide what’s the best decision for you and your company.