Will IRS Get A Piece Of Google’s Generous Death Benefits?

forbes_logo_whiteLike a lot of people, I am astounded over Google’s employee death benefits. Forbes’ Meghan Casserly’s interview with Google’s Chief People Officer Laszlo Bock is must reading: Here’s What Happens To Google Employees When They Die. It’s all the more awe-inspiring as a simple disclosure long after the fact, not a recruiting stunt or PR move.

If a U.S. Google employee passes away while employed there, his or her surviving spouse or domestic partner gets a check for 50% of the employee’s salary every year for 10 years. There’s no tenure requirement so most of the 34,000 employees qualify. That’s a big benefit and big-hearted, but is it taxed?

That turns out to be a more confusing question than you might think. Much may depend on how Google set it up. If it is funded as group term life insurance (as seems likely), is it part of a Googler’s compensation? In a sense, sure. But whether it’s taxable depends on how much it’s worth.

Section 79 of the tax code provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy by an employer. Google can deduct the cost and there’s no income to Googlers if the total coverage doesn’t exceed $50,000. Presumably 10 years of half salary coverage is more than $50,000.

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