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1992-04-30
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@031 CHAP ZZ
┌─────────────────────────────────────────┐
│ GROUP TERM LIFE INSURANCE │
└─────────────────────────────────────────┘
An employer, such as a corporation, may set up a group-term life insur-
ance plan as a fringe benefit and deduct the insurance premiums it pays
on behalf of its employees. If such an insurance plan qualifies as
"non-discriminatory," then, to the extent the life insurance coverage
on an employee does not exceed $50,000 under the plan during the tax-
able year, the premiums paid by the employer do not constitute taxable
income to the employee. Even if an employee's coverage exceeds $50,000,
the amount the employee must include in taxable income from the addi-
tional insurance premiums paid by the employer for the excess coverage
is sometimes considerably less than the premium actually paid (and de-
ducted) by the employer. (Note that any such taxable amount is now
considered "FICA wages" and is thus subject to FICA taxes.)
Thus, like medical and disability insurance, group term life insurance
is a highly tax-advantaged fringe benefit, being deductible by the em-
ployer, but not taxable as compensation to the employee, in general.
Note that the owner or owners of an unincorporated business cannot de-
duct the premiums for their own coverage under a group life insurance
plan, since they are not "employees" of their businesses for tax pur-
poses. Similarly, while a deduction may be allowed to an S corporation
for such coverage on 2% (or more) shareholders of the corporation, the
amount deductible will be treated as taxable compensation to the share-
holder, who will obtain no offsetting deduction. Thus, as a business
owner, you can obtain the above favorable tax treatment for your own
coverage under a group-term plan ONLY if the business is set up in the
form of a "C corporation."
@CODE: LS
In @STATE, the only life insurance is being related to the
Commissar.
@CODE:OF