[UCRDBR] Lincoln Financial – 2025 Disability Benefits Taxation

[Departmental Benefits Representatives]

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February 24, 2025

To:
Department Benefits Representatives (DBRs)
From:
Central HR Benefits Office
Re:
Lincoln Financial – 2025 Disability Benefits Taxation

DBRs, please DO NOT share this information.  It is for your information only.  Do not reply to this mail.  Please send a separate email with questions to benefits at ucr.edu<mailto:benefits at ucr.edu>.


The UC Disability Program offers both employer and employee-paid benefit plans.  The tax implications on benefits from these plans depend on who pays the insurance premiums.


  *   Basic Disability – UC pays premiums. Benefits payments are generally taxable.
  *   Voluntary Short and Long-Term Disability – Employees pay premiums. Benefits payments are generally not taxable.

The Basic and Voluntary Short-Term Disability (VSTD) plans both provide benefits for a maximum of six (6) months.  When an employee is enrolled in both the VSTD and Basic disability plans, benefits from both plans are usually paid concurrently.  Lincoln Financial Group (LFG) issues a single consolidated payment.  Each year, LFG uses IRS guidelines to determine which portion of disability benefits is taxable.  For 2025, 14.83% of disability payments will be subject to taxes when employees receive both Basic and VSTD benefits at the same time – a decrease from the 2024 percentage.

Taxability of Disability Benefits
Plan
2024
2025
Basic Disability only
100%
100%
Voluntary Short-Term Disability only
0%
0%
Basic and Voluntary Short-Term Disability (when combined into consolidated payments)
15.78%
14.83%
Voluntary Long-Term Disability only
0%
0%

Please direct employees to contact the LFG case manager by phone or email with questions about taxes withheld from disability benefit payments.

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