Robert Hess and Company Insurance Brokers

12.14.11
Group Term Life and Disability Benefit Tax Notification

The Internal Revenue Code requires employers to include additional income for group term life insurance premiums for coverage in excess of $50,000 on employee W-2 or 1099 forms. The IRC provides the Uniform Premiums Table (below) for computing the value of the premium to employees rather than the actual premium cost.

The IRS requires W-2 forms be prepared for any worker who received disability benefits during the year, whether taxable or not. The taxable portion depends on the percent of premium paid by the employer:

· If the employer pays all of the premium, the benefits paid to the employee are taxable.

· If the employee pays all the costs of coverage, the benefits are not taxable.

· If the employer and the employee share the cost, the percent of the employer’s contribution is taxable and the rest is not taxable.

· Employee contributions made on a pre-tax basis (such as Section 125 or cafeteria plans) are considered employer-paid dollars for tax purposes.

If the age of the employee on the       The monthly cost per

last day of his/her tax year is:             $1,000 life insurance is:

  Under 25                                                 $0.05

  25-29                                                      $0.06

  30-34                                                      $0.08

  35-39                                                      $0.09

  40-44                                                      $0.10

  45-49                                                      $0.15

  50-54                                                      $0.23

  55-59                                                      $0.43

  60-64                                                      $0.66

  65-69                                                      $1.27

  70 and older                                            $2.06

IRS Publication 15-B (2011),  pp. 11-12