Representing the Injured or Disabled Member Part 45: Disability Benefits under the CBA — Should they be Added to your Contract?

By: Jim Cline and Erica Shelley Nelson

Representing the Injured or Disabled Member

Part 45: Disability Benefits under the CBA — Should they be Added to your Contract?

This article is the 45th in a multiple part series covering the rights your injured and disabled members have and how you, as a union or guild representative, can best assist them.  Over the past several weeks and continuing for the next several weeks, we have been and will be publishing, in various segments, information on how state and federal laws protect your members who are hurt or otherwise unable to work. We will cover topics including disability discrimination law, the FMLA, job protection rights under the CBA, workers compensation, disability benefits, and the right to bring a civil lawsuit.

The topics we are covering are also addressed in detail in a book that we published: Helping the Injured or Disabled Member: A Guidebook for the Washington Law Enforcement and Fire Union Representative.  It is also our intention over the course of the next year to travel through the state and provide training to public safety union and guild representatives on how best to enforce these rights.  Expect to hear more on that in the months ahead.

This 45th article in these newsletter series provides a discussion concerning how to apply for Social Security benefits. For more information, visit our Premium Website. There you will find an online version of the Injured or Disabled Member’s Guidebook and other information on the laws covering your members.

For further information on the tax consequences of private disability plans, see more information on the Premium Website concerning taxation of such benefits.

Often, law enforcement or fire unions sponsor disability plans, either directly or through statewide councils with which they affiliate. Sometimes these plans are paid in part or whole by the employer under the terms negotiated in the CBA. Sometimes they are paid entirely by the members.

There are some tax implications involved with these plans that should be considered when they are established, especially as to the issue of whether you want to negotiate to have the employer pay the premium. The taxation of disability insurance and benefits is a bit complicated, and public safety unions and their members should make some thought-out choices on this subject. One way or the other, the income associated on such a benefit is going to be taxed, and you have to decide the best way to face that tax.

If the employer pays for the premium, the insurance premium is a tax free benefit, but in an instance in which an individual disability is later incurred, and benefits are paid out, the payout will then be treated as taxable income. On the other hand, if the employees pay for the premium out of their already taxed wages, a later insurance payout is exempt from taxation.

A different rule applies where the employer, as often is the case, pays for only a portion of the disability insurance premium. In that instance, the benefit is taxed on a “pro rata” basis: The proportion of the premium paid by the employee’s post-tax contribution is exempt from tax, and the proportion that was paid as a benefit by the employer is subject to tax.

Of course, there is an element of choice here. But generally when we explain the options and tax implications to clients, many make the election to forego putting their total compensation dollars into employer paid disability in favor of other paid benefits and member-paid disability premiums.

In the next article in this series, we will go over the Federal Benefits for Public Safety Officers.

**Visit our Premium Website for more information on Workers Compensation.**