What are the advantages to pre-tax deductions for mandated state disability programs?
Self-insuring the mandated state disability Insurance (SDI) programs in California, Hawaii, New Jersey, New York and Puerto Rico allows the employer to have the employee contributions to these plans paid by pretax deductions rather than after tax-deductions This allows employers to do the following: • Lowers the cost of the employees SDI contributions by 25-to-50%, depending on the tax bracket of each employee. • Eliminates the net pay windfall that employees enjoy while disabled if the employer supplements the tax-free SDI payments with taxable payments from sick pay/salary continuation or STD programs. • Allows Sedgwick CMS to combine the SDI payments with the supplemental sick pay/salary continuation or STD payments into a single benefit check paid directly to the employees at their home or through their employer’s payroll system. • Allows the employer to have the same cost and same benefits in all States, regardless of whether the employee is in a mandated SDI State or not. One “In
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