lump sum versus payments for medical insurance expenses are not exactly the same as they would typically be under the typical fixed rate situation. Under normal circumstances, a standard benefit package would include a premium, a deductible, plus a reimbursement bonus benefit. With a lump sum payout, there are basically no more benefits to be paid out. So why lump sum vs. payments? Well for one thing, if the sum of the payment amount is less than the total amount of the premiums, then a payment is made out of that difference. On the other hand, when comparing payments to a lump sum, it is important to look at what could happen if the balance goes out of whack (ie: no more money left over after the premium has been paid).
In my professional opinion, I would say that a lump sum versus payments for medical benefits are a function of a few different things. The first being the age of the worker. Older workers tend to have a longer period in employment, so their earnings potential is usually a little bit lower. This means that they will be less likely to see benefits from their employers in the form of a lump sum.
The second factor that plays into the pros and cons of lump sum versus payments for medical benefits is the workers’ compensation board that issued the workers’ compensation. If the finding is that an injury was sustained as a result of an accident, then the payment is usually issued to the injured person as a lump sum. The workers’ comp board may also issue an additional administrative fee for issuing this check to the individual.
There is also the potential for a future increase in income as a result of future increases in pension potential. With a lump sum versus monthly payments for medical benefits, the potential increase in income is dependent upon the pension levels established at the time of the accident. Many people will retire at 55 years of age with a pension. When comparing a lump sum versus monthly payments for medical benefits, it is important to consider the potential increase in pension upon retirement.
The final potential advantage or disadvantage with lump sum versus payments for medical benefits revolves around paying taxes on the lump sum versus monthly payments. People who work in construction or in a manufacturing position may find themselves not having access to a pension plan when they reach retirement age. This may be because the company they work for has gone out of business or because the company does not offer a pension plan. In these cases, the worker may be able to pay taxes on the lump sum versus monthly payments for medical benefits until the day they reach retirement age.
These are just some of the factors to consider when comparing lump sum versus payments for medical benefits. There are many others that can be explored if the person has additional information available. For more information regarding these and other considerations, contact a certified public accountant or tax advisor who can help you better understand your options. If you are retired or if you are planning to retire, the investment you make now can have a lasting impact on your lifetime. Understanding your choices now can have a positive impact on your comfort and your finances in the future.