Section 79 Challenges

IRC Section 79 can pose real challenges for employers offering life insurance and voluntary benefits. Unless properly structured, employers may be required to calculate imputed income on employer paid basic life insurance in excess of $50,000 and
voluntary life insurance on employees or dependents. Employers must also be careful to design benefit plans that are non-discriminatory and do not favor key employees. Because of the Straddle Rule, employers must be careful to design benefit plans that make sure no employee pays more than the Table I rate for
coverage while another employee pays less than the Table I rate. The cost to the employer of calculating imputed income and making sure the benefits package remains in compliance with IRS requirements can be substantial. As a result, careful planning and design of an employee benefits package is vital. Insurance Point
will be happy to assist your organization in planning for your employee benefits to ensure that you and your employees avoid the pitfalls of the straddle rule.

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