Calculating Group-term Life

Group-term Life

Group-term life (GTL) – Value up to $50,000 is excluded from employee income. Over $50,000 is subject to FICA but not FIT or FUTA.

Group-term Life

• Taxable value must be reported on the employee’s W-2 and the 940 and 941

• Calculation of GTL is determined by age banded IRS tables, not the actual cost to the employer

Example Calculation

Jane is 52 and her annual salary is $70,000. Her employer group term life provides coverage at 2x her annual salary with a $130,000 cap. Premiums are 100% employer paid.

Example Calculation

First calculate her coverage:

$70,000 x 2= $140,000. $140,000 > $130,000

Jane’s coverage is $130,000

Example Calculation

Next calculate the taxable excess: $130,000 - $50,000 = $80,000

Then determine the number of $1,000 increments: $80,000 / $1,000 = 80

Example Calculation

Apply the rate from the IRS table for age 50-54: $.23 * 80 = $18.40 per month taxable income