[UCRDBR] Lincoln Financial - 2022 Disability Benefit Taxation Changes

[Departmental Benefits Representatives]

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April 12, 2022

To:
Department Benefit Representatives
From:
HR Benefits Office on behalf of the UC Office of the President
Re:
Lincoln Financial - 2022 Disability Benefit Taxation Changes
The UC Disability Program offers both employer and employee-paid benefit plans. Whether or not benefits paid from these plans are subject to income tax depends on who pays the insurance premiums.


*       Basic Disability - UC pays premiums and benefits are generally taxable.

*       Voluntary Short and Long-Term Disability - Employees pay premiums and benefits are generally not taxable.

The Basic and Voluntary Short-Term Disability (VSTD) plans both provide benefits for a maximum of 6 months, and are usually paid concurrently if an employee is enrolled in VSTD. When this happens, Lincoln Financial Group (LFG) consolidates payments from both plans into one check. Each year LFG follows IRS guidelines to determine the percentage of disability benefits subject to taxability. For 2022, 17.33% of the disability payment is taxable when employees receive both Basic and VSTD benefits at the same time. This is a slight reduction from 2021.
Taxability of Disability Benefits
Plan
2021
2022
Basic Disability only
100%
100%
Voluntary Short-Term Disability only
0%
0%
Basic and Voluntary Short-Term Disability (when combined into consolidated payments)
17.77%
17.33%
Voluntary Long-Term Disability only
0%
0%

Employees may contact their LFG case manager by phone or email with questions about taxation of their disability benefit payments.

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