Group term life (GTL) is a type of life insurance that employers provide to their employees. This insurance offers a death benefit to the employee's beneficiaries if the employee passes away during the coverage period. The premium for GTL is typically paid by the employer, but if the coverage exceeds $50,000, the excess amount is considered taxable income for the employee and must be reported on their Form W-2.
Group term life insurance is primarily used in the context of employee benefits and compensation packages. It falls under employment law and tax law, as it involves both the provision of benefits by employers and the tax implications for employees. Users can manage related forms and documentation through resources like US Legal Forms, which provide templates for various employment and insurance agreements.
Here are a couple of examples of abatement:
Example 1: An employee has a group term life insurance policy with a face value of $60,000. The first $50,000 is not taxable, but the $10,000 excess will be reported as taxable income on their W-2.
Example 2: An employee covers their spouse under the GTL policy for $1,500. This amount is considered a de minimis fringe benefit and is not taxable. However, if the coverage were $3,000, the entire amount would need to be reported as taxable income.
| Term | Definition | Key Differences |
|---|---|---|
| Whole Life Insurance | A permanent life insurance policy that remains in effect for the insured's lifetime. | Whole life insurance builds cash value and does not expire, unlike GTL. |
| Term Life Insurance | A life insurance policy that provides coverage for a specific period. | Term life insurance does not typically have employer involvement and does not offer group benefits. |
If you are an employee receiving group term life insurance, review your coverage details, especially if it exceeds $50,000. Ensure you understand the tax implications and how they will affect your income. For assistance with related forms or to clarify your benefits, consider using US Legal Forms for ready-to-use templates. If you have complex questions or concerns, consulting a legal professional may be beneficial.
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| Attribute | Details |
|---|---|
| Coverage Type | Employer-provided life insurance |
| Tax Exemption Limit | $50,000 |
| Taxable Income Reporting | Excess coverage over $50,000 |
| Dependent Coverage Exemption | $2,000 or less is de minimis |
If you leave your job, your group term life insurance coverage typically ends. You may have options to convert it to an individual policy.