UpDate - Vol. 15, No. 30, Page FB-2
May 2, 1996
Flexible Benefits '96-'97
Group Life Insurance Can Be Taxable Income

The Internal Revenue Service (IRS) states the cost of any employer-
provided group insurance in excess of $50,000 is taxable income. Many
employees consider this additional cost when choosing their life
insurance option. Of course, there are also other reasons for choosing
higher levels of coverage. That's what is so attractive about the
University's flexible benefits program-it gives you choices. You have
an opportunity to take all your needs into consideration when
selecting your coverage.

Whether or not the Group Life Insurance provided by the University is
taxable income depends on the option you select. Of the four life
insurance choices in the flexible benefits program, two can trigger a
taxable event and two do not. The four options available are:

     $10,000
     $50,000
     Two times salary
     Four times salary

Selecting the $10,000 or $50,000 option will avoid the taxable income
issue of the group life program. Choosing either "two times salary" or
"four times salary" often results in additional taxable income which
affects the taxable value reported by the University on your W-2 form
at the end of the year. Because Federal tax guidelines also state that
any premiums paid by the employee reduce the amount of his or her
taxable income, the University considers your group life premium
payments when reporting your "group life insurance" costs. If you wish
to estimate how this ruling could affect your taxes, the Benefits
Office can provide you with the IRS table of insurance costs.

It is important that you compare the benefits of life insurance
coverage over $50,000 to the additional tax liability that excess
coverage triggers. It is also advisable to review your options
frequently-particularly at the age groups where significant increases
occur.