Imputed Income for Group Term Life Insurance

The first $50,000 of coverage volume for any life plan is a tax-free benefit for employees. If an employee’s Basic Life plan volume is greater than $50,000, the IRS calculates imputed income for the value of the premium paid by the employer for the excess coverage, and add this amount to the employee’s gross income. 

If an employee’s Voluntary Life plan volume is greater than $50,000 and the employee’s rate falls below the IRS rates stated in Publication 15-B Table 2-2, the IRS may calculate imputed income for the value of the difference in premium paid by the employee for the excess coverage, and add this amount to the employee’s gross income.

 

Imputed income applies to the value of the premium paid by the employer for the coverage volume, and not the actual death benefit paid to beneficiaries.

Depending on the plan type, imputed income is calculated differently (or not all).


Imputed Income for Life Insurance

Imputed income amounts for Basic and Voluntary Life plans are calculated using the volume of coverage on the plan (V) and an age-banded rate (r), which is determined by the IRS ... Learn more

Imputed Income for Bundled Life and AD&D Plans

For employees enrolled in both a Life plan and an AD&D plan, imputed income applies only for the volume of the Life plan. There is no imputed income for AD&D coverage. If t... Learn more

Imputed Income and Owners

Imputed income is calculated on employer-paid Basic Life coverage and employee paid Voluntary Life coverage.If an owner is identified as a 2% S Corp owner in Zenefits, their imp... Learn more

Total Amount of Coverage

IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are... Learn more

Why do I need to enter in an AD&D rate when loading a bundled voluntary life plan?

In order to calculate the cost of life coverage in a voluntary life plan that is bundled with AD&D, Zenefits needs to know the separate cost for AD&D. This is also essential for... Learn more

Will imputed income adjustments generate for the current tax year in payroll?

Yes, in two scenarios:Your company has payroll synced through Zenefits Pay Connect, and  you have a code created in your payroll for imputed income, and you have mapped imputed ... Learn more

What if I, or my carrier, can't separate the voluntary life and AD&D rates?

No problem. Just enter $0 for the AD&D rate. In this scenario, imputed income will not be calculated for employees; it's very likely that the plan is not considered a group term... Learn more

How do I ensure that imputed income amounts are communicated to payroll?

If you have payroll synced through Pay Connect, please talk directly to your payroll provider to set up the proper imputed income code. Once your payroll has synced, Zenefits wi... Learn more

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