Employers that Sponsor Group Term Life Insurance:

Annual Reminder

Many employers sponsor group term life insurance, and those that offer coverage on an employer-paid basis over $50,000 must remember to report imputed income.

The IRS sets forth tax rules for employer-sponsored group term life insurance in Section 79 which allows employees to exclude up to $50,000 from his or her taxable income. Any amounts above $50,000 are taxable to the employee using Section 79 Table rates.

• Note: the amount of imputed income is not equal to the amount of excess coverage. Section 79 Table rates should be used to determine the amount of imputed income.

Which Employers are Required to Impute Income for Life Insurance? Employers offering employer-paid group term life insurance in excess of $50,000.

What Should Employers Do? Contact their payroll department to ensure amounts above the $50K threshold are being reported as imputed income according to the IRS Table rates. This is generally reported per paycheck or as a lump sum at the end of the year.

Is this a new requirement? No. More information can be found here starting on page 13.

Are amounts an employee elects as voluntary/supplemental coverage included in the calculation above? Typically, no, because those amounts should be paid for with post-tax dollars via paycheck deductions.

• IMA Note: Be sure to check payroll to confirm that employee deductions for supplemental life insurance coverage are post-tax deductions.

Please contact your benefits broker with any questions.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.

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