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Group life insurance
You may decide to offer group life insurance coverage as part of your employee-benefits program. Group life insurance is a single policy that is used to provide insurance coverage for your employees.
As long as you provide coverage equitably to your employees and meet some other basic requirements, the IRS generally allows you to exclude from employees' income the premiums you pay for up to $50,000 of life insurance coverage. You may decide to offer a group life-insurance benefit as part of a cafeteria plan.
As a result of the income exclusion of premiums for the initial $50,000 of coverage, you do not pay payroll or unemployment taxes and do not have to withhold income taxes. Similarly, employees do not owe income, payroll, or unemployment taxes on premiums you pay for the first $50,000 of group life-insurance coverage. Premiums that you pay for policy coverage in excess of $50,000 per employee, however, are subject to tax and withholding requirements.
The following table shows the rate at which you must value the cost of group life insurance benefits that exceed $50,000 per employee. This amount is added to income and amounts are taxed and withheld accordingly. This table is located in IRS Pub. 15-B.
For example, if you pay the premiums for a $100,000 policy for 10 months for a 35-year old employee, the cost of coverage subject to taxes and withholding is $45 ($0.09 times 10 months times 50):
Monthly cost of group-life insurance premiums (per $1,000 in coverage in excess of $50,000)
| Age |
Monthly cost
| Monthly cost of extra
$50,000 in coverage
|
| Under 25 |
$0.05 |
$2.50 |
| 25 through 29 |
$0.06 |
$3.00 |
| 30 through 34 |
$0.08 |
$4.00 |
| 35 through 39 |
$0.09 |
$4.50 |
| 40 through 44 |
$0.10 |
$5.00 |
| 45 through 49 |
$0.15 |
$7.50 |
| 50 through 54 |
$0.23 |
$11.50 |
| 55 through 59 |
$0.43 |
$21.50 |
| 60 through 64 |
$0.66 |
$33.00 |
| 65 through 69 |
$1.27 |
$63.50 |
| 70 and over |
$2.06 |
$103.00 |
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To inquire about group-life insurance coverage, check with your benefits administrator.
The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
Next Topic: Self-insured plans
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