Overview

Main Menu Name: Group

Calculates the cost per month per thousand of group term life insurance, the total monthly cost of group life insurance under IRS tax tables, the total annual cost, the total cumulative cost, and the after-tax cost.

In this article:

• Background
• Why should I use this calculator?
• Getting Started
• Entering Data
• Results

Background

Group life insurance generates a tax cost. The covered employee must report this cost as income. The cost is figured in the IRS's Table I.

Generally, the cost of coverage in excess of $50,000 is taxable. But if the employee contributes to the cost of insurance, the entire contribution (for coverage up to $50,000 and for excess coverage) is allocable to coverage in excess of $50,000. This means each dollar contributed by the employee offsets an otherwise taxable dollar (no carryovers allowed). Key employees are not eligible for this $50,000 exclusion if the group term plan works in their favor.

Reportable costs increase in five-year bands until they stabilize at age 64. The annual after-tax costs can be surprisingly high. The results should be compared with the cost of individual coverage. In many cases, individual coverage through a competitive product will be less expensive.

Why should I use this calculator?

• To analyze the true total cost of group term life to the insured employee.
• To compare group insurance costs to individual term and whole life coverage costs.

Getting Started

Group life insurance generates a tax cost. The covered employee must report this cost as income. The cost is figured in the IRS's Table I.

Generally, the cost of coverage in excess of $50,000 is taxable. But if the employee contributes to the cost of insurance, the entire contribution (for coverage up to $50,000 and for excess coverage) is allocable to coverage in excess of $50,000. This means each dollar contributed by the employee offset san otherwise taxable dollar (no carryovers allowed). Key employees are not eligible for this $50,000exclusion if the group term plan works in their favor.

Reportable costs increase in five-year bands until they stabilize at age 64. The annual after-tax costs can be surprisingly high. The results should be compared with the cost of individual coverage. In many cases, individual coverage through a competitive product will be less expensive.

Entering Data

1. Age:  Enter the age of the insured as attained on last day of insured employee's taxable year. (Employees over 64 are treated as if in the 5-year age bracket 60-64).
2. Amount of Taxable Coverage:  Enter the amount of coverage in excess of the excludible $50,000.
3. Tax Bracket:  Enter the marginal tax bracket of the insured employee.

Results

The program calculates the cost per $1,000 per month, the total monthly cost, the total annual cost, the total cumulative cost and the cumulative tax cost.