Trends & Insights

  • Tax considerations for employee benefits

    Taxes on life insurance

    Did you know that the first $50,000 of an employer-provided group life benefit can be excluded from compensation (per the IRS)? For those employees who receive group life insurance coverage over that amount, you include the cost of the excess insurance as taxable income to the employee.

    See life insurance IRS tax rules (PDF) for more information.

    Employees benefit when you pay disability premiums post-tax

    Paying disability insurance premium on a post-tax basis increases the payable monthly benefit an employee receives while on claim1. Here are some examples that show how paying the premium post-tax increases the benefit employees receive.

    60% Benefit Pre-Tax Premium
    Gross Monthly Income $3,000
    Take Home Pay$2,250
    Gross Monthly Benefit$1,800
    Tax on Benefit$450
    Payable Monthly Benefit$1,350
    Replacement Ratio260%
    60% Benefit Post-Tax Premium
    Gross Monthly Income $3,000
    Take Home Pay$2,250
    Gross Monthly Benefit$1,800
    Tax on Benefit$0
    Payable Monthly Benefit$1,800
    Replacement Ratio280%

    60% Benefit Pre-Tax Premium
    Gross Monthly Income $12,500
    Take Home Pay$8,125
    Gross Monthly Benefit$7,500
    Tax on Benefit$2,625
    Payable Monthly Benefit$4,875
    Replacement Ratio260%
    60% Benefit Post-Tax Premium
    Gross Monthly Income $12,500
    Take Home Pay$8,125
    Gross Monthly Benefit$7,500
    Tax on Benefit$0
    Payable Monthly Benefit$7,500
    Replacement Ratio292%

    Group disability benefit tax implications

    Since group disability benefits can be structured a number of ways, understanding the tax implications for your business can be challenging.

    View to help determine the plan type that best fits your needs (PDF)

     

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Fiduciary Regulation FAQs

We're here to help you navigate the changes ahead from the Department of Labor's fiduciary regulation. That's why we've answered some frequently asked questions about the regulation.