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Home : Essentials of Payroll : Life Insurance
Life InsuranceLife InsuranceIt is common practice for a company to provide group term life insurance to its employees as part of a standard benefit package. This requires some extra reporting from a tax perspective, however. If the amount of the life insurance benefit exceeds $50,000, the company must report the incremental cost of the life insurance over $50,000 (to the extent that the employee is not paying for the additional insurance) on the employees W-2 form as taxable income. In the less common case, where the company provides life insurance that results in some amount of cash surrender value, then the cost of this permanent benefit to the employee must also be included in the employee's W-2 form. The only case in which these costs are not included on an employee's W-2 form is when the company is the beneficiary of the policy, rather than the employee. The opposite situation arises if the company is providing life insurance only to a few key employees, rather than to all employees; in this case, the entire cost of the insurance must be reported on the employee's W-2 form as taxable income. 241
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