Group Life Insurance Table

Under federal tax laws, employer-paid premiums for life insurance coverage greater than $50,000 must be reported as income subject to Social Security and Medicare taxes. This coverage is also taxable in some states.

In order to determine the tax owed by the employee and, if applicable, the employee deduction, information needs to be entered in the following pages:

For additional information, refer to Employee Group Life Over 50K Page and Employee Deductions Page.

Menu Path:  Human Resources > Reference Tables > Payroll > Group Life Insurance

Calculating Group Life Insurance Tax Deductions

The premiums paid by employers for group life insurance coverage exceeding $50,000 are treated as additional earnings for federal, Social Security, and Medicare, as well as for annual taxes in some states.

The system determines the additional income based on the total coverage in excess of $50,000, the number of pays the employee receives annually, and a uniform monthly premium rate per $1,000 of coverage, as indexed by the employee's age. If the insurance is self paid, the premiums taken from the employee's pay are deducted from the additional earnings.

• The system uses the age of the employee to look up the premium paid per $1,000 of coverage, as indexed in the Group Life Insurance table. The employee's age is calculated as follows:
  Employee's Age = Current Year - Year of Employee's Birth

• The employee's taxable coverage (any amount over $50,000) is determined using the following equation:
  Taxable Coverage = Total Coverage - $50,000

• During payroll processing, the system calculates the amount that should be added to the employee's taxable earnings for this coverage. Again, it references the Group Life Insurance table for the Premium corresponding to the employee's calculated age:
  (Additional Taxable Earnings = Taxable Coverage ÷ $1,000) x Premium x (12 Months ÷ Number of Pays)

• If a portion of the insurance premium is deducted from the employee's pay, the system uses the following equation to adjust the taxable amount:
  Adjusted Taxable Earnings = Additional Taxable Earnings - Employee Deduction

• The Additional Taxable Earnings or Adjusted Taxable Earnings are added to the regular earnings to determine an employee's total taxable amount.

Note

For guidelines on employee tax liabilities regarding group life insurance coverage, refer to the applicable federal and state tax provisions.

Setting Up Group Life Insurance Deductions

Four pages are used in setting up tax deductions for group life insurance coverage in excess of $50,000: Group Life Insurance, Deduction Table, Employee Deductions, and Employee Group Life Over 50K.

Also, for each employee who has group life coverage, make sure a date is entered in the employee's Birth Date field. This field is in the General section of the Employee Information detail page.

Group Life Insurance Page

The Group Life Insurance page lists the age ranges used to index the monthly premium rates for employer-paid insurance per $1,000 of coverage. To access the page, select Group Life Insurance from the Payroll listing in the Human Resources Reference Tables menu.

Your entries in the page's Age and Premium fields depend on the brackets set up under federal tax laws. Enter the highest age for each bracket in the Age column and the corresponding rate per $1,000 of coverage in the Premium column.

The data should be entered based on the Employer Supplemental Tax Guide (IRS Pub. 15-A).

Deduction Table Page

A Deduction record must be created to reference the insurance, whether the coverage is an employer-paid benefit, employee-paid, or a combination.

• If coverage is fully employer-paid, set the General tab's Method field to None and the Employer tab's Benefit Method field to Record Amount. The system references the employee's deduction record for the amount.

• If the coverage is fully employee-paid, set the General tab's Method field to Employee Amount and the Employer tab's Benefit Method field to None.

• If the employer and employee share in the cost, set the Method to Employee Amount and the Benefit Method to Record Amount.

With both employer-paid and employee-paid insurance benefits, the Employer tab's Benefit Account field should be set to 99999999 so that charges are not expensed. Procedures for other fields in the Deduction record are the same as those followed when setting up regular deductions/benefits. For details, refer to Deduction Table.

If the employee's premium in the deduction record is matched by the employer, the Employee Amount/Rate and Employer Amount/Rate fields should be left at their zero defaults, since the system references the premium amounts set in the Employee Deductions page.

In the Taxation tab, the checkboxes in the Deduction Tax Exemptions and Benefit Taxes sections exempt employees from taxes, except FICA. You may also be required to select the State Tax checkboxes, depending on whether the group life benefit is subject to state taxes.

Employee Deductions Page

Premium amounts, start/stop dates, and other parameters for group life insurance deductions/benefits are set in the Employee Deductions page. This page can be accessed when adding or changing employee records in the Human Resources database.

• If the insurance coverage is employer-paid, leave the Deduction Amount/Rate field at its zero default, and enter the premium for each pay period in the Benefit Amount/Rate field.

• If the premium is co-paid, enter the employee's share for each pay in the Deduction Amount/Rate field and the employer's share in the Benefit Amount/Rate field.

• If the employee is self-insured, enter the premium deducted from each pay in the Deduction Amount/Rate field, and leave the Benefit Amount/Rate field at zero.

Following is an example of how to set up the Employee Deductions page's Employee Deduction Information section. In the example, the amounts in the Deduction Amount/Rate field and Employer tab's Benefit Amount/Rate field match. The fields in the Bank and Accruals tabs should be left at their defaults.

For more information, refer to Employee Deductions Page.

Employee Group Life Over 50K Page

The Employee Group Life Over 50K page, which displays when adding a new employee record to the database, must be completed if any portion of the premium is paid by the employer and the coverage is greater than $50,000. However, you do not need to complete this page if the coverage is $50,000 or less or is totally employee-paid.

You can also access the Group Life Insurance Over 50K page when changing employee records. To do so, select Human Resources > Entry & Processing > Employee > Employee Information, search for and list the employee, select the employee's record in the List section to display the Employee Information detail page, and then click Group Life on the Action Bar.

For more information, refer to Employee Group Life Over 50K Page.