Alan Friesen here certified Employee Benefits specialist with another tip to help you get the best value out of your employee benefit program. This one is about optimizing the cost sharing on your benefit program. Now from the employer side, it doesn't really matter whatever you're paying for is going to be a deductible, a deductible business expense for you as employer. But from the employee perspective, there's three different ways that those benefits can be taxed. One way is that they could be tax free, so a tax free form of compensation for your employee, that's a great thing. The second way is that the premium you have paid will be a taxable benefit.
So you have to add that on to their tea for at the end of the year. And then the third way is that the benefit when the individual receives it as in the case of disability income, is taxable income when received by the employee. So three different ways, but you can optimize the value of it just by varying your cost sharing. So let me give you an example how this works. Let's say your benefit program, the premium for your life insurance is $5. And the premium for your Accidental Death and Dismemberment coverage is $2.
Your dependent life premium is $3. Your critical conditions benefit is $15. Your Short Term Disability coverage, the premium for that is $25. Your premium for your long term disability coverage is $50. And then your extended health coverage, the monthly premiums $100 and the dental coverage monthly premium is $100. So if you add all those up, that comes to $300.
Now, if you just made it and said okay, we're just going to split it 5050 I'm going to take off the employee's paycheck $150 for these benefits. Well, what would happen is the portion of the premium that you as employer paid for the life insurance, the actual death, the dependent life, the critical condition benefit, that will trigger a taxable benefit. So that's kind of a pain for you, you have to track that taxable benefit added on to the Before the end of the year, further, the disability related benefits the short term disability and the long term disability, let's say the short term disability is $600. A week is what the person would get. And the long term disability is $3,000 a month. That's what the individual would receive with their disabled.
If you as employer have paid any portion of that premium, then me as the employee, I'm going to get that $3,000 a month as taxable income, so I have to pay tax on that $3,000 a month. So not optimal. Optimal is this. We basically take I'm the employee, you're their employer, and you're going to say to me here, it's going to be 5050 split, still the same money 150 employer 150 employee, but my split as employee, I'm going to pay all of the life insurance, accidental death dependent life insurance, critical condition, short term disability and long term disability premiums, and then a smaller portion of the extended health and dental maybe only, let's say, 25% 30% Didn't do the math, but it's easy enough to figure out what the math works out to. So that way you eliminate all of the negative taxable benefits get the most value out of the program.
So it's a very simple way to optimize the value out of your employee benefit program. If you if I can assist you give me a call or look me up on LinkedIn, and my contact information will be right up here and I will gladly help you and help you optimize the value of your employee benefit program. Thanks much