Imputed Income (Group Life)

The first $50,000 of coverage — Under IRC Section 79, the cost of the first $50,000 of employer-provided group term life insurance is excluded from the employee's gross income. The cost of coverage above $50,000 (reduced by any employee contributions) is taxable to the employee as imputed income. There are additional rules for key employees and for group term plans that discriminate in favor of highly compensated employees.

National insurance concept

Only on the cost of coverage above $50,000 of face amount. — IRC Section 79 provides that the first $50,000 of employer-paid group term life insurance is tax-free to the employee. The cost of coverage over $50,000 is included in the employee's gross income as imputed income, calculated from an IRS table based on age and the amount of excess coverage. The death proceeds themselves remain generally income-tax-free under Section 101. The rule applies only to group term coverage, not to group permanent insurance, and if the employee contributes toward the premium, that contribution reduces the taxable amount.

National insurance concept