Taxation✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
Under IRC Section 79, an employer may provide group term life insurance to employees, and the premiums for how much of the coverage are generally NOT included in the employee's taxable income?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
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.
Why the other options are wrong
- B) $5,000 is not the group term threshold; Section 79 sets the exclusion at $50,000.
- C) Coverage above $50,000 is taxed; the exclusion is not unlimited.
- D) The exclusion stops at $50,000, not $100,000; the excess over $50,000 is imputed income.
Memory hook
Section 79 = the first $50,000 of group term is free lunch for the employee. Above that, the IRS takes a seat.