Previously we discussed the importance of having a Qualified Sick Pay Plan. It is to protect you from paying taxes with penalties if you wanted to pay you or key employees in your business in the event anyone became disabled. You can either self-insure or use a company to shift the risk and save your business valuable capital as no one knows how long a disability lasts. As previously promised, here is a brief description to the three documents. As you read a summary of the key points in each document, remember at age 40, there is a 49.7% chance of a disability occurring before Age 65. Permit me to make one disclaimer. We, my team and I, strongly encourage you to seek the advice of legal counsel. You can call or email me. I’d be happy to provide you with samples of these three agreements.
The first document or agreement shall read, “A Company Resolution.” Here we include a list of all the benefits and specifies the following features.
1. The percentage of your income that will be paid in the event of a long and or short term disability.
2. It describes how this benefit will be offset by any payments from the State Mandated Disability Law, Workers Compensation, or any other benefits.
3. It then describes the different classes of employees entitled to these benefits.
4. It defines how a disability will be determined or the definition of a total disability.
Your second document should be, A Resolution of the Board of Directors. In this document, a quorum of the Board shall be present. It is then dated and signed by all appropriate parties that this Qualified Sick Pay Plan is formally adopted as a fringe benefit for the listed parties in the first agreement.
Lastly, a plan letter is written and sent to each employee. In this plan letter the benefits paid to each employee are clearly spelled out. This would include the class of the employee, the definition and duration of the disability, and how the disability will be paid for.
Please understand that I can easily provide you with all three publications. As we said in one of our first articles, it’s always prudent to work with an Attorney, a Certified Public Accountant (CPA) and a financial consultant. Next we’ll discuss how to fund your Qualified Sick Pay Plan.