Life Insurance - Imputed Income

[Guest akwallace]

We provide employer paid group life up to $50,000. We also offer supplemental life, 100% employee paid.

My understanding is that there would be no imputed income issues under this scenario, since the employer does not provide over $50,000 in life insurance.

I am being told by my payroll dept. that imputed income should also be calculated on the employee paid supplemental and spouse supplemental.

Can anyone offer any guidance?

[Guest b2kates]

look at IRC Section 79 which exempts 50000 from income to employee when paid by employer. If purchased by employee on after tax basis, employee is paying for insurance with their own funds. They have already been taxed and there is no imputing of income.

[Sandra Pearce]

As stated by the previous poster, only taxable if the employee is paying for the life insurance pre-tax in a 125 plan.

[MGB]

That is generally true, but there are exceptions. For example, assume assume all employees pay the same rate. The older employees are being subsidized by the younger employees. It is my understanding this would produce imputed income.

Under normal conditions whereby an employee is purchasing from an insurance company and the amount they pay is rated for them (instead of spread over a large group), then there is no imputed income.