Even a very small rate change can cause an employee-pay-all policy to become employer-carried. An employer that wants to provide an employee pay-all policy without that policy becoming employer carried should review the rates under that policy against Table I each time the policy’s rates change and each time Table I changes.
|Same facts as in the previous example except that the rate under the Excess Policy in 2011 for those under age 25 is $0.02 lower than the rate charged in 2011.|
|Result under the Basic Policy: Same as noted in the previous example.|
|Result under the Excess Policy: One of the Excess Policy’s 2011 rates is now lower than the Table I rate, while the other rates remain above the Table I rates, causing a straddle relative to the
Table I rates. Therefore, ABC is deemed to ‘carry’ the Excess Policy for purposes of Section 79 during 2011. ABC must impute income to Ms. X during 2011 as described in the first example above.
Calculating Group Term Life Insurance Imputed Income
|1. Determine the amount of Basic Life Coverage provided by the employer|
|2. Add any supplemental, optional or voluntary life coverage which is paid for with pre-tax contribution|
|3. Subtract $50,000|
|4. Divide the balance by 1,000|
|5. Multiply the result in #4 above by the IRS Table I rate, based on age at the end of the calendar year|
|6. Multiply the total by the number of months covered during the year|
Imputed income can be offset by contributions made by employees for all or a portion of group term life insurance coverage.