New Tax Laws Benefit Texas Workers in Alternative Plans

2018 opt-out taxes are down, so “Tim’s” injury benefits are up when he loses time from work

With the new tax laws come questions about how Texas workers will be impacted. Here’s the answer: one “employee” that many of us know, “Tim the Electrician,” sees more money in his pocket when enrolled in an alternative to workers’ comp.

You may remember the story: This time last year, “Tim” – a 45 year-old electrician (a fictional character with a story that is real for many Texas workers) fell on the job and has been recovering at home ever since. Like every Texas worker injured on the job, Tim deserves to be enrolled in workers’ compensation or a quality injury benefit plan. Expenses related to job-site injury are a normal cost of labor, as well as his need to pay for housing, groceries and most other expenses, which didn’t change just because he has had to miss work during a long recovery. However, whether Tim has workers’ compensation or an injury benefit plan can make a big difference.

Tim’s situation is examined in a report, “Texas Nonsubscriber Option: Providing Better Disability Benefits?” first published in 2016 by WorkCompCentral. This report has been updated for the recent 2018 reductions in federal income tax rates. PartnerSource has analyzed Tim’s situation in light of recent tax law changes, which took effect in 2018.

Benefit adequacy for injured workers is super-important and can be confusing. Workers’ compensation is a government-run program that provides good insurance coverage for most Texas workers. But approximately one in five Texas employers sponsors their own injury benefit plan instead of participating in the government-run program. Wage replacement benefits under workers’ compensation are not subject to federal income and employment taxes, and such benefits are taxable under Texas injury benefit plans.

But here’s the important thing to note: Most injured workers find private injury benefit plans – responsible alternatives to workers’ comp -- achieve better medical outcomes, and the plans pay such high wage replacement benefits for time off work that the worker receives more take-home pay, even after taxes.

If Tim is enrolled in a responsible alternative injury benefit plan, Tim will never miss a paycheck and is more able to meet his normal family budget. His Texas injury benefit plan also maintains normal payroll deductions for his group health insurance coverage, retirement plan contributions, child support, union dues and other benefits.

Measured over a five-year period, new PartnerSource injury benefit plans, the choice that covers approximately 800,000 Texas workers, provide:

• Average wage replacement at 92% of pre-injury pay,
• 98% of these plans pay wage replacement from Day 1 (no seven-day waiting period, like workers’ comp), and
• 88% of these plans have UNLIMITED weekly benefits.

Because in this scenario, Tim is enrolled in an alternative injury benefit plan, he has access to the best medical providers in the state of Texas, many of whom do not accept workers’ compensation patients. And, since the federal income tax rates went down for 2018, Tim gets to take home even more of this generous wage replacement benefit.

No one wants to get hurt at work and suffer a disabling injury that gets in the way of taking care of themselves and their family. But when accidents happen – and they happen approximately 25,000 times every year in Texas – injury benefit plans like those developed by PartnerSource are there to deliver quality coverage for Texans and make a real-world, positive impact. Tim is on the road to a faster recovery from his fall at work and today, on Tax Day, he’s in even better shape financially.

 

Learn more about the advantages of an alternative to workers’ comp. Contact Russell Huber today for the Better Disability Benefits Report from PartnerSource.