Actually, an employer may already have a sick pay plan and not know that it doesn't meet Internal Revenue Service (IRS) requirements. If a company continues income payments to a disabled owner or employee without a valid, formal "sick pay" plan, their generosity can expose the business and the disabled employee to severe tax penalties. So-called "ad hoc" payments not made through a valid sick pay plan are considered non-deductible corporate dividends. What's more, payments received while disabled are treated as income and are without benefit of any possible sick plan exclusion. This results in double taxation.

The ideal solution to this problem is a salary continuation plan — a tax-favored way for businesses to pay for individual disability income insurance for the principals and selected employees. Sometimes called "sick pay" or "Section 105(d)" plans, these formal, IRS-approved arrangements are the only way to continue a portion of current salary to a disabled employee without losing some of the top benefits of paying salary to employees. See salary continuation plan documents on the DI Proposal System Software.

If you're in the business and professional market and aren't selling salary continuation plans, you're leaving dollars on the table for the competition. The market is there. businessowners and professionals understand the need, and if you don't talk to them about it, someone else will!

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