What is the difference between pre-tax and post-tax long-term disability (LTD) plans?
If you purchase LTD coverage on a pre-tax basis, this means you pay federal income tax on the benefit if you become disabled but you pay no federal income tax on the premium. If you choose the post-tax option, you pay federal income tax on the premium but no federal income tax on the benefit (or income) if you become disabled. It is necessary to pay for the benefit on a “post-tax” basis for a period of 36 months to make the benefit 100 percent free of federal taxation.
