Under Internal Revenue Code Section 79, an employee who is covered by an employer-paid group term life insurance policy must generally include in gross income the value of coverage:

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 over $50,000 is taxable to the employee, calculated under the IRS's uniform premium table (Table I). This favorable tax treatment is one reason group term life is a common employee benefit.

Why the other options are wrong

• B) The threshold is $50,000, not $5,000; $5,000 relates to the income tax exclusion of an employer-paid death benefit under a qualified plan.
• C) The exclusion is not tied to the employee's salary; it is a flat $50,000 face-amount threshold.
• D) The taxability rule applies to employer-paid coverage; employee-paid contributions generally are not taxable to the employee.

Memory hook

$50K of group term = tax-free perk. Every dollar of coverage beyond that is taxable to the employee.