Federal Tax Code §79 requires all employers to report the value, or "economic benefit," of any Group Term Life Insurance amounts in excess of $50,000 on any one employee. While the first $50,000 is tax-free, the economic benefit of any life insurance amount that exceeds $50,000 must be included on each individual's W-2 as prescribed by the law (imputed income). The economic benefit calculations are based on each employee's age and life insurance amount over $50,000 and are generated from a government chart referred to as Table I.
It is the responsibility of the employer to calculate the value of these benefits for tax purposes. The insurance companies are under no obligation to perform these calculations. This information can be reported via payroll throughout the year, or as a lump sum prior to the final payroll date in 2017. If you have not set up Table I calculations with your payroll vendor, now is the time to gather the necessary information to complete the calculations.
Who Will Perform the Calculations?
As a client of Vita, we have the capability to perform these calculations using our proprietary software if you need assistance. Please verify with your payroll team or third party administrator if they are performing this calculation on your behalf.
If you find that you do need our assistance this year, please advise us at least 10 days prior to your data deadline for the final payroll so that we can send you the necessary file format.
For those clients for whom we performed this service last year, you will be receiving an e-mail within the next two weeks with instructions and an updated spreadsheet for this year.
Fees for Table I Calculation Service
Our normal fee for this service is $250 plus $1.50 per employee calculation. We will waive this fee if the data is electronically reported to us in the proper format and a rush turnaround (less than 5 working days) is not requested.
Remember, you will need to work backwards from your payroll company's deadline in order to make sure that we have five days to perform the calculations and get the results back to you in time.