Most new employees don’t really pay attention to the Permanent Health Insurance (PHI) benefits, also known as Group Income Protection (GIP), that they might need if they become ill for an extended period of time and are unable to work.
Payments for the Permanent Health Insurance Benefit
Participate in a program to ensure that your income is maintained in the event that you are unable to work due to illness or injury. The schemes, usually referred to as income continuation plans, include:
- group schemes or individual policies, and will have a Revenue registered number
- approved or unapproved by Revenue as Permanent Health Benefit Schemes.
Under certain circumstances, you can claim tax relief if you participate in such a plan.
The program you participate in must have Revenue approval in order for you to be eligible for tax reduction.
How do I know if I have the benefit of group income protection?
Not all organisations provide this benefit, and some will only provide it to certain staff. Check your employment contract, employee handbook, intranet or wherever your benefits are listed. Employers usually provide employees with a short brochure outlining the terms of any policy, when it applies and what an individual may be entitled to. While many of the policies are similar, an individual’s entitlement will always depend upon what the policy says.
What does permanent heath insurance benefit usually entail?
If you satisfy the medical and other eligibility criteria, you will be entitled to receive a fixed percentage of your usual salary (usually between 50% and 75%) for a certain period set out in the policy. This is often:
- until you are fit to return to work whether in your previous role or another one; or,
- until retirement age (or death if earlier); or,
- for a fixed number of years e.g. two or five years.
Most group income protection policies (although not all) require an employee to remain in employment in order to continue receiving the benefit.
The percentage of pay you receive may be calculated on basic salary only or on your total earnings (e.g. including commission and bonuses) and there is often a cap. The amount you receive may be fixed or may increase with inflation.
How do I qualify for group income protection insurance?
This all depends on what the policy states but many require that:
- you meet eligibility criteria (for example, certain medical conditions may be excluded, including pre-existing conditions); and/or
- you have been on sick leave for a specific period – usually 6 months – (the deferred period) before the benefit will apply; and/or
- your employer has considered and made any reasonable adjustments to facilitate your return to work; and/or
- you have satisfied the insurer’s medical assessment that you are incapable of carrying out the material and substantial duties of your insured occupation (usually the role you were carrying out when you became ill or were injured) due to your illness or injury.
Your employer should cooperate with you by providing you with an application form in good time if you are absent from work on long-term sick leave and do not appear well enough to return to work.
The relief has been granted
Based on the premiums you paid during the claim year, you will receive tax relief. Either one of the following:
- salary As You Earn (PAYE) will be determined by your employer once the amounts have been deducted from your gross salary.
- Revenue will modify your standard rate cut-off point (SRCOP) and tax credits under the net pay arrangement.
10% of your total income for the tax year is the maximum amount of relief you may receive. Payments made to these programs are not exempt from the Universal Social Charge (USC) or Pay Related Social Insurance (PRSI).
Employer contributions
On your behalf, your employer may make contributions to an authorized plan. On these contributions, USC is due.
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Where the total contribution (employer and employee) does not reach 10% of the employee’s salary, PAYE and PRSI are not applicable. Any sum in excess of 10% should be paid through payroll and subject to PAYE and PRSI.
The premiums paid by the employer are taxable as Benefit in Kind (BIK) when they are for an unapproved policy or plan.
How to claim Permanent Health Insurance
You can claim the relief during the year by following these steps:
- sign into myAccount
- click on the ‘Manage your tax’ link in PAYE Services
- select ‘Claim tax credits’
- select ‘Health’ and ‘Income Continuance’.
To claim the relief for a prior year, follow these steps:
For 2019 and subsequent years:
- sign in to myAccount
- click on the ‘Review your Tax 2019-2022’ link in PAYE Services
- request Statement of Liability
- click on ‘Complete Income Tax Return’
- in the ‘Tax credits & Reliefs’ page select ‘Health’ and ‘Income Continuance’
- complete and submit the form.
The amount received from Permanent Health Insurance schemes (PHI)
Approved schemes
On payments that you receive through PHI programmes, you must pay PAYE and USC. The scheme’s administrator will take any appropriate deductions.
If you work for yourself, you can decide to have the benefits count against your revenue from trading. Within six months of purchasing the policy, you must complete Form PH (5) to notify Revenue.
Unapproved schemes
Payments are not taxable unless they were made continuously for at least a year prior to the tax year. On payments that are longer than 12 months, you must pay PAYE and USC. You are in charge of paying the tax to Revenue in this scenario.
FAQs about Permanent Health Insurance
What medical expenses does Permanent Health Insurance cover?
How does pre-existing health conditions impact eligibility?
Can one buy additional coverage under Permanent Health Insurance?
Is Permanent Health Insurance suitable for self-employed individuals?
What factors affect the premium costs of Permanent Health Insurance?
Are there any waiting periods associated with Permanent Health Insurance?
Conclusion on Permanent Health Insurance
In essence, Permanent Health Insurance emerges as a holistic solution, ensuring both health security and financial stability. Understanding its nuances, benefits, and considerations aids in making well-informed decisions for a secure future.