Tax Treatment of Supplemental Individual Disability Insurance Plans

Disability insurance plans for the purpose of income protection can be designed in a multitude of ways to achieve the objectives of both the individual employee and the employer. Coverage is often sponsored by employers in the form of group short-term disability (STD) and/or long-term disability (LTD) insurance plans for all benefit-eligible employees at an afford­able premium. However, due to benefit levels, policy structure, and compensation of the insured, these plans are not always designed to adequately protect the earnings of key employees with high incomes.

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