Human Resources Managers
Murphy's Law and The Law of Averages
These laws dictate that an owner, manager, executive or other valued key-employee may be the next person in your organization to suffer a disability.
Murphy's Law dictates that it will be an owner. If so, how will you answer these questions?
- Why wasn't my salary "risk managed" to the maximum allowable limits?
- Why wasn't I told my firm couldn't legally deduct disability wages paid to me?¹
- WHAT CAN YOU DO TODAY TO UNWIND THIS MESS?
It is the responsibility of the HR Manager to field these difficult questions. During such an emotionally charged conversation, how would you answer them?
Solution
Hero or Scapegoat? Before a disability strikes and before this unpleasant conversation takes place, implement an IRC Section 105 Qualified Sick Pay Plans today. By addressing the first two questions now, the third question need never be asked! What's worse, a potential "Tax Trap"² awaits your next move.
Two Minutes on Section 105 Qualified Sick Pay Plans
¹ Without an IRC Section 105 Qualified Sick Pay Plan (that you must be in writing prior to the disability), there's nothing the disabled owner, the business or Human Resources can do.
² A 1962 Landmark Supreme Court Decision (never overturned) drives this issue.
Adopting a QSPP does not require an insurance purchase. However, an insured QSPP contains three powerful tax shelters on covered employees:
- Premiums are fully tax-deductible as a necessary business expense (IRC, Sect. 162)
- Premiums are not shown as W2 earned income to the employee (IRC, Sect. 106)
- Proceeds are exempt from FICA after 6 months (Circular E, Employer's Tax Guide)
- *Bonus* . Your Firm, Not Uncle Sam, Decides Who May Participate.
An important side benefit of a QSPP is this simple Plan Resolution and the Plan Letters define who is a participant. This can be extremely useful should a disabled non-participant file for a claim.
Documentation! Documentation! Documentation! Is it fair to assume that the boss would expect to receive compensation during his/her disability? Why not be the first to present an approach tht minimizes taxation and helps avoid potentially costly IRS penalties? If your boss says no to a Section 105, you've documented your files should a disability later occur.
Attract, Retain and Reward your Valued Employees
| ATTRACT | In your efforts to attract talented employees, is your firm taking advantage of tax-favored programs that could potentially close the employment package deal? |
|---|---|
| RETAIN | How about retaining valued employees in whom your firm has invested so heavily and whose unique talents may be lost to another employee? |
| REWARD | Are there key-employees (including owners) you'd like to see rewarded for their loyal and profitable services to your business? |
Individual Disability Income is an excellent "attact, retain, and reward" tool that:
- Complements your group disability plan by offsetting benefits lost to income taxation
- Addresses the income exposures of high-earners whose incomes may have exceeded the group disability maximum benefits limits
- Where no group plan exists, it serves as primary income protection
Who, how long and for how much is your firm prepared to pay to a disabled employee when a Long-Term disability strikes?
IRC Section 105 Qualified Sick Pay Plans
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Two Minutes on Section 105 Qualified Sick Pay Plans
Human Resources Managers are also encouraged to visit:
Business Owners, Managers & Executives 412(e)(3) Retirement Plans
Personal Disability Income Retirement Protection Critical Illness Insurance
Female Business Owners, Managers, Executives & Firms with Female Employees
Guaranteed Standard Issue Disability Income (Minimum of only 10-lives!) Long Term Care
Disability Overhead Expense Disability Income Protecting Business Loans/Leases Disability Buy-Sell
Employee Voluntary Purchase Disability Executive Bonus Executive Carve-Out
Group Life, STD, LTD Personally Owned Life Insurance Endorsement Split Dollar Life
Menu of Available Insurance Programs
