IRS Tax Table for Group Life Insurance

Important Reminder

Regarding: 2000 Group Life Insurance and W2 Income Reporting

Issue: Employees who have been provided with more than $50,000 of company paid group term life insurance must have reported additional taxable income on their 2000 W2 form. Also, employees who have elected optional life insurance and are paying for it with before tax dollars are also to report the excess amount over $50,000. Example: Employee has $75,000 of employer paid group life. The employee purchases another $75,000 of optional life and is paying it with before tax dollars through the Section 125 plan. The total is $150,000 and with a $50,000 exclusion leaving $100,000. If you do not allow optional life to be paid through the Section 125 pre-tax plan. This would eliminate the optional group life in this calculation.

Calculating the cost for excess coverage requires multiplying the excess amount by the factor identified in a government published "Uniform Premiums - Table I" for each month of the taxable year.

Calculation:

Step 1: Collect and review group life insurance billing statements for the 1999 calendar year. Identify employees with amounts over $50,000, and put their dates of birth next to their names.

Step 2: Calculate the amount that is over $50,000 for each month of the year. Example: $75,000 total amount of coverage. Subtract: $50,000 employer paid tax free maximum amount. Difference: $25,000 excess coverage for the month

Step 3: Calculate the employees' age at the end of the tax year. Example: Date of birth is 6/1/61. Employee is age 39 on Dec 31, 2000. Amount of excess coverage is $25,000 for January 2000. From Table, I cost is $.11 per $1,000 of coverage. Calculate: $.11 x 25 = $2.75 for January

Calculate cost for each month for the balance of the year and total them.

If the employee shares in cost of the group term life plan, then you may deduct the employee contribution from the sum of the monthly inclusive amount calculated above. Only if the payment was made outside of a Section 125 Pre- tax Plan. Employee payments must be made with after tax dollars.

Withholding: We understand this reportable income is subject to FICA withholding. Please check with your payroll or tax advisor for additional information. Don't forget to report this on your 4th calendar year quarter Form 941.

Extra Support: As a service to ClientServ Clients, you may elect to have the calculation computed by ClientServ. There is no charge for ClientServ clients whom we serve as agents of record. We need the following information prior to December 10.

1. Copies of January 2000 through December 2000 billings showing the life insurance amounts
2. Dates of birth of employees who exceed $50,000 of group life coverage in any month.
3. Any employee after tax contributions to the group life plan.

We will compute and report to you the additional taxable income for each employee. You will then be responsible for the FICA withholding and reporting the W2 information.

Uniform Premium for $1,000 of Group Term Life Insurance Protection
Age Bracket
Cost for One Month Period
Use Age at End of tax year
Under 25
.05
25-30
.06
31-34
.08
35-39
.09
40-44
.10
45-49
.15
50-54
.23
55-59
.43
60-64
.66
65-69
1.27
70 & Over
2.06

 

 

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