Total amount of coverage
IRC section 79 provides an exclusion for the first $ 50000 group term life insurance coverage under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of these policies does not exceed $ 50000. The imputed cost of coverage in excess of $ 50000 be included in income, using the IRS Premium table, and are subject to social security and Medicare taxes.
Developed directly or indirectly by the employer
A fringe benefit tax is raised whether the coverage is more than $ 50000 and politics is seen as led directly or indirectly by the employer. A policy is considered led directly or indirectly by the employer if:
1. The employer pays any cost of life insurance, or
2. The employer arranges for the payment of premiums and premiums paid by at least one employee subsidize those paid by at least another employee (the "straddle" rule).
The determination of whether the charges combined premium costs se basa en el IRS Schedule Premium rates, not the actual cost.
Because the employer is affecting the premium cost through its grant and / or redistribution of paper, there is a benefit to employees. This benefit is taxable, even if workers are paying the full cost they are charged. You must calculate the taxable portion of premiums for coverage that exceeds $ 50000.
No leads directly or indirectly by the employer
A policy that does not consider itself led directly or indirectly by the employer has no tax consequences for the worker. Because the employees are paying the cost and the employer is not redistribute the cost of premiums through an insurance system, the employer has no reporting requirements.
Example 1 - All employees of employers X are in the 40 to 44 years old. According to the IRS Premium table, the cost per thousand is .10. The employer pays the full cost of insurance. If at least one employee is charged more than .10 per thousand of coverage, and at least one is responsible for less than .10, coverage is considered executed by the employer. Therefore, every employee is subject to social security and Medicare tax on the cost of coverage over $ 50000.
Example 2 - The facts are the same as Example 1, except for all employees, pay the same rate, which is set by the third party insurer. The employer pays nothing toward the coast. Therefore there is no taxable income of workers. No matter what the rate is, as the employer does not subsidize the cost or redistribute it among employees.
The coverage provided by more than one insurer
Generally, if there is more than a policy of the same insurance coverage to employees, a combined test is used to determine if it leads directly or indirectly by the employer. However, the regulation provides exceptions that allow policies to be analysed separately if the costs and coverage can be clearly allocated between the two policies. See Regulation 1.79 for more information.
If coverage is provided by more than one insurer, each policy must be tested separately to determine whether it is directly or indirectly by the employer.