As an employer, you’re likely aware of the requirement of managing and calculating “imputed income” for your employees. This requirement of the IRS applies to employees who are covered by an employer-provided benefit of more than $50,000 in term life insurance. This requirement is tedious and challenging, especially if you have a payroll or software service, however it is one that must be administered. This article from Mutual of Omaha outlines the specific criteria for calculating imputed income for employer-paid term life insurance. The article also includes something employers may NOT be aware of… the requirement of calculating imputed income for employee-paid (or voluntary) term life plans. Certain voluntary plans, even those with benefits in flat increments (e.g. – $5,000, $10,000) that are paid for with after-tax dollars must still meet the requirements and filing laws of Section 79 of the IRS Code. See the full article from Mutual of Omaha for further details.
Click this link to our contributor, Millennium Benefits Consulting, for the complete Mutual of Omaha article, “Understanding Life Insurance and Imputed Income”.