385 / How are disability pension payments taxed to self-employed individuals when made from a qualified pension or profit-sharing plan?
Disability payments from a qualified plan receive different tax treatment, depending on whether the payments are made to common law employees (see Q 384) or to self-employed individuals.
If a self-employed individual draws benefits from a plan because of permanent disability, the disability payments will be taxed under the same rules that apply to retirement benefits ( Q 3969).
If a self-employed individual receives disability payments through health insurance, the employee may exclude from gross income any amounts attributable to nondeductible contributions as a self-employed person.1
Where contributions under a qualified plan are applied to provide incidental accident and health insurance for a self-employed individual, the insurance is treated as if the employee had purchased it directly from the insurance company.2