Posted by Barry on November 06, 1998 at 06:01:49:
In Reply to: Re: I Had To Quit Work - Anyone Else Had To? posted by Steve Munez on November 05, 1998 at 17:05:22:
While you are still at work, you may want to at least faliliarize yourself with your medical and employer-provided insurance benefits, just so you have an idea of what you may need to prepare for and determine if there are any changes you may want to make to these benefits.
Here is a big one...if you have disability benefits...verify whehter YOU pay the premiums and whether you pay them with pre-tax or after-tax dollars, or if your employer pays some / all of them for you.
If YOU pay the premiums in AFTER-tax dollars, your benefits (i.e. any disability income you might eventually be receiving from the disability insurance company)are not subject to federal income tax. (I don't remember whether state taxes apply or not, and I suppose it depends on the state).
If your employer pays the premiums or you pay them with pre-tax dollars, your disability income is subject to normal fed taxes.
If I had paid my premiums myself with after-tax dollars, my net income would hardly have changed when I shifted to disability. In actuality my employer paid them, so my net income dropped about 30%.
However, I've since heard (on a personal finance lecture televised on PBS; also read it in one of the lecturer's [Jonathan Pond] books) that you can REIMBURSE your employer for disability premiums and thereby save the tax bite. Presumably you would need to do this while you're still working, not after you go on disability.
I couldn't find any more specific info on this so I called the IRS and put the question to them. They researched it and called me back to say (with obvious annoyance)they were unable to find any regulation that prevented someone from doing that. For that matter, they couldn't even tell me that I couldn't do it even though I was already on disability. That REALLY upset them. The best they could do was to tell me that ~"it wouldn't be right"..., i.e. they would at least give me a hard time.
Sorry I couldn't give you any other suggestions. As you point out, each situation has it's own personal considerations. I had a good boss, so I kept him fairly well informed as to my condition as it worsened. Of course, it was pretty obvious to them as time went on anyway, but they did give me a lot of slack for several years before it just became too impractical.