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Compare Pre-Tax and After-Tax Benefits
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DSST
DSSTPF.129 Compare Pre-Tax and After-Tax Benefits
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A disability plan says premiums can be paid pre-tax or after-tax. It also says benefits are taxable if premiums are paid pre-tax and generally tax-free if premiums are paid after-tax. Which employee reasoning is strongest?
A
Choose after-tax premiums to lower current taxable wages the most.
B
Choose pre-tax premiums because they make future benefits tax-free in this plan.
C
Choose after-tax premiums if future tax-free disability benefits are more important than current tax savings.
D
Choose either option because tax timing and future benefits are identical.
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