Employer-paid group term life insurance is considered a fringe benefit.
If the benefit amount of the policy is less than $50,000, it does not need to be reported on an employee’s Form W-2. There may be an exception where the employee is covered by multiple employer-paid policies, in which case the combined benefit amount may become relevant. Please consult your accountant or tax advisor to confirm if this applies.
If the benefit amount of the policy is greater than $50,000, the imputed cost of coverage in excess of $50,000 for each employee is taxable and must be reported. Please refer to the Group Term Life Insurance section of IRS Publication 15-B to help determine the taxable value. Justworks cannot calculate the imputed value to report on Form W-2.
Greater than 2% Shareholders of S-Corps
If your company files as an S-Corp, the total amount of the employer-paid premium for life insurance is taxable for the greater than 2% shareholders. This is regardless of the policy being more or less than $50,000. Please refer to the Group Term Life Insurance section of IRS Publication 15-B to help determine the taxable value. Justworks cannot calculate the imputed value to report on Form W-2.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.