Important note: If the company pays for your disability with pre-tax dollars, your disability payments are taxed as income. If you pay for your disability wit

Important note: If the company pays for your disability with pre-tax dollars, your disability payments are taxed as income. If you pay for your disability with after-tax dollars, you are not taxed on the income. Keep this in mind when designing the plan. If taxing the employees on their disability benefits makes the benefits tax-free, you should give your employees that option.