As a general rule, anything that an employee receives from their employer as compensation for services – including fringe benefits – counts towards their gross income under Internal Revenue Code (IRC) section 61, unless specifically excluded by some other IRC section. Section 79 of the IRC provides such an exclusion. It stipulates that the cost of the first $50,000 of employer-provided group term life insurance is generally excluded from the employee's imputed income.
100 percent employee-paid group term Additional Life/Supplemental Life insurance and 100 percent employee-paid group term Voluntary Life insurance are subject to Section 79 if the rates are age-graded and "straddle" Table I rates. "Straddling" occurs when the employer arranges for a plan that results in at least one employee paying less and one employee paying more than the Table I cost of his or her insurance.
In the Table I Straddle Test, enter the employee Additional Life, Supplemental Life or Voluntary Life rates for each of the age brackets in the first column, then click the button to compare. The result will tell you whether the rates straddle Table I rates.
This information is intended to provide only general and not comprehensive information. It is not intended and should not be viewed as tax or legal advice. Please consult your tax and legal professionals. The Standard assumes no liability with respect to this information.
Table I Straddle Test