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Group Term Life Insurance

An employee is not taxed on the premiums paid by the employer under a group term plan which meets the requirements of IRC Sec. 79, unless the amount of coverage exceeds $50,000.

If the face amount exceeds $50,000, the employer must compute the "cost" of the additional protection and notify the employee of the amount to include in his or her taxable income.

The government's Table 2001 is used to determine the tax reportable cost of the extra protection.

Age

Cost Per Thousand
Per Year

Age

Cost Per Thousand
Per Year

20

$0.62

50

$2.30

25

$0.71

55

$4.35

30

$0.87

60

$6.51

35

$0.99

65

$11.90

40

$1 .10

70

$20.62

45

$1.53

75

$33.05

An example of a 45-year-old employee with $150,000 of employer paid group term life insurance would be calculated as follows:

Total Insurance $150,000
Less $50,000 (not reportable)
Taxable Amount $100,000 X $1.53 per thousand

Result: The employee must report an additional $ $153 in income (assuming a 30% tax bracket = $45.90 in additional tax).  Note: As the employee ages his taxable cost will increase.

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