LTD Chargeback

[spintz]

What is the name of your state? FL ( or NJ or MA )

We've recently been bought out by another company. This new company has a LTD (Long Term Disability) Chargeback setup which is mandatory. This reduces my paycheck because I pay taxes on the the money spent by my company on the premium for the LTD. I don't like this, and would rather not have LTD Chargeback, and to pay taxes on any LTD benefits I may receive if I ever need to receive them. My company told me this is not an option. I then asked to be opted out of the LTD benefits and was also told this is not an option.

Is this even legal? They are basically forcing me to take benefits and costing me money by doing so.

Please advise....

 

[Zigner]

THIS FORUM IS FOR QUESTIONS ABOUT U.S. LAW ONLY
When posting a question, you must include the name of your state!

 

[spintz]

I live in Florida. My "division" is based in NJ and the parent company is in MA. So which state applies?

 

[cbg]

What do you mean by a chargeback?

 

[spintz]

What do you mean by a chargeback?

Well, here's the description I got -

<COMPANY NAME> pays 100% of the premium cost.
In order for you to receive a tax-free benefit upon disability, <COMPANY NAME> will add the cost of your long term disability premium to your W-2 wages. You will pay current taxes on the cost of the premium
BUT
at time of disability, benefit will be tax free!

So, basically, the premium is calculated based on your salary. Let's say that premium, for my salary is $200 / year. Then, instead of my salary being say, $70,000, my salary is treated as $70,200. But I never actually see that money, it's paid directly to the LTD benefit. BUT, I am taxed as though I made $70,200, even though I actually only got $70,000. Confusing, I know. I did not understand it at first either, until I noticed my paycheck was less than before they started applying this "chargeback".

The reason I'm upset about this, is because what it amounts to, is I'm being given $200, but being told how to spend it. I have to pay taxes on money I never get to see/use. I'd be happy just not paying the "chargeback" all together, but my company says it's mandatory and there is no way for me to opt out! Even if I wanted to decline the LTD benefits, I can't, I MUST receive them and I MUST pay the taxes on this chargeback. Seems very shady to me, and I don't like it one bit.

 

[ecmst12]

Employment law is based on the state where the employee usually works. So, sounds like FL.

As far as I know, your employer can require you to accept a benefit if they pay 100% of the premium. Even if the money paid for that benefit is taxable as income.

 

[spintz]

Thanks for the feedback. If that is true, that is truly disturbing. I want control over my paycheck, and the money I earn.

The really sad thing, is it would actually save my company money, to just not offer me the LTD benefits at all, and they won't even do that.

Just more motivation to become self-employed....

 

[Beth3]

You still haven't explained what you mean by "chargeback." If you mean you're being taxed on the LTD premiums your employer pays on your behalf and that participation is mandatory, yes, this is legal. Should you ever have to make a claim for LTD benefits, I can only imagine you'd be better off receiving 100% of the benefit (not whatever's remaining after federal and State taxes are withheld) but that's just my opinion.