Even though employees are not required to contribute employer-provided basic GTL coverage as opposed to employee-paid voluntary life coverage , some employees may want to opt-out of the benefit to avoid the imputed income amounts. There is no requirement to permit an employee opt-out from the employer-paid basic GTL because there are no employee contributions. However, most employers do permit employees to waive the coverage if the employee requests it.
The GTL carrier will generally permit the opt-out because it is rare that employees request it. Best practice is to have employees complete a GTL benefit opt-out form in these circumstances. Other than waiving the GTL benefit, there are a couple alternatives available to employers and employees to avoid the GTL imputed income:. This avoids the need to impute income on any amount of the additional voluntary GTL coverage purchased by the employee. The IRS deems this low level of coverage to qualify as a de minimis fringe benefit.
The full amount is taxable i. IRS guidance states that employers should prorate the cost from Table I if less than a full month of coverage is involved.
That appears to be the more common approach in practice. For more details, see our previous post: Final Paycheck Issues. The primary potential penalty for failure to correctly impute GTL income is the Form W-2 penalties for incorrectly reporting income.
Note that these penalties apply once for the incorrect filing with the IRS, and once for the incorrect furnishing to employees. So they are generally doubled in practice.
Thus, the amount of any proceeds payable under a policy, or portion of a policy, which qualifies for one of the exceptions to the rule of inclusion provided by section 79 b is not taken into account.
Table I. Section 79 b 2 provides an exception with respect to the amounts referred to in section 79 a for the cost of any portion of the group-term life insurance on the life of an employee provided during part or all of the taxable year of the employee under which the employer is directly or indirectly the beneficiary, or under which a person described in section c relating to definition of charitable contributions is the sole beneficiary, for the entire period during such taxable year for which the employee receives such insurance.
Such a designation may be made by the employee with respect to any portion of the group-term life insurance on his life. However, no deduction is allowed under section , relating to charitable, etc.
Such requirement is satisfied if the person described in section c is the beneficiary under such policy or portion of the policy, and there is no contingent or similar beneficiary under such policy or such portion other than a person described in section c.
This coverage is excluded as a de minimis fringe benefit. Whether a benefit provided is considered de minimis depends on all the facts and circumstances. See Notice for more information. If part of the coverage for a spouse or dependents is taxable, the same Premium Table is used as for the employee.
Skip to main content. Search form Search. Home School College Alumni Giving. Some of the most common taxable fringe benefits given by Principia are: Gifts Any gift given to an employee that was paid for with Principia funds.
See Notice for more information. If part of the coverage for a spouse or dependents is taxable, the same Premium Table is used as for the employee. This amount is also considered carried by the employer. More In File.
Not Carried Directly or Indirectly by the Employer A policy that is not considered carried directly or indirectly by the employer has no tax consequences to the employee. Coverage Provided by More Than One Insurer Generally, if there is more than one policy from the same insurer providing coverage to employees, a combined test is used to determine whether it is carried directly or indirectly by the employer.
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