Darrell has a group long-term disability income policy paid by his employer. Which of these statements is true?

• A. Any Benefits Received Will Be Tax-Free
• B. The Premiums Paid by the Employer Are Not Tax-Deductible
• C. The Specified Benefit Amount Is a Percentage of His Wages
• D. Long-Term Policy Benefits Are Not Coordinated with Social Security Benefits

Answer: (C)

In a group long-term disability plan funded by the employer, benefits are typically calculated as a percentage of pre-disability wages rather than a fixed dollar amount. This means the specified benefit amount is expressed as a portion of what you earned, such as a percentage of your wages before you became disabled. That design is why the statement about the benefit being a percentage of his wages is the true one.

Employer-paid premiums are generally deductible to the employer as a business expense, so saying the premiums are not tax-deductible isn’t correct. And many LTD plans are coordinated with Social Security benefits, meaning benefits are offset by any Social Security disability benefits; the claim that long-term benefits are not coordinated with Social Security is also not accurate.