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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. (Note: This
document is in Portable Document Format (PDF). If you do not have
a PDF reader installed on your computer, you can download a
version of Acrobat Reader for free at Adobe Systems' Web site.)
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.
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