Discussion Question 5-1 is comprised of three parts. We have

  

Discussion Question 5-1 is comprised of three parts. We have discussed the influence that disability premiums have on the eventual taxation of benefits received from the disability plan. This raises some interesting questions about how to structure the disability portion of a benefits package. Consider the following scenario: Argyle Chemicals has just decided to add a long-term disability program to their benefit package. They are looking at three options:  (a) a basic 40% company paid benefit with an employee buy-up option to 50 or 60% of monthly covered income, (b) a company-paid benefit providing a 50% of monthly covered income, or (c) an employee-paid disability plan providing 66 2/3% of monthly covered income.  Discuss all three options by answering the following questions   (A 1½-page response is required for the combination of Parts A, B, and C.)

  

Part A

Would it be better   for the employees to have option “A” with shared premiums? What factors would   contribute to making this decision? 

  

Part B

Would it be better   for the employees to have option “B” with the employer paying all of the   premium? What factors would contribute to making this decision? 

 

Part C

Would it be better   for the employees to have option “C” and pay all of the premiums? What   factors would contribute to making this the correct choice? 

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