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Group Term Life Insurance
The Commonwealth provides group term life insurance for all active participants in the Program. This coverage pays survivor benefits in addition to any death benefits available under your retirement account.
The single-page highlight sheet (.PDF) provides a synopsis of the group term life insurance benefits.
The Certificate of Insurance (.PDF) contains a detailed description of the life insurance benefits provided under the program.
Tax Note
The value of employer-provided group term life insurance in excess of $50,000 is generally subject to current taxation. This includes the life insurance provided under the Optional Retirement Program and the "Basic Life Insurance" provided by the Commonwealth through the Group Insurance Commission. The cost is generally considered imputed income and, therefore, is subject to income and FICA taxes each year.
The cost of this coverage is determined pursuant to Internal Revenue Service 
regulations and is reported on a participant's Form W-2 each year. For most Optional Retirement Program participants, the taxable cost of the life insurance is small in relation to the overall coverage provided.
For example, an Optional Retirement Program participant who is 47 years of age and has an annual salary of $60,000 receives one and a half times his/her annual wage in life insurance through the Group Life Insurance Plan. Accordingly, the Group Life Insurance Benefit is $90,000. The "Basic Life Insurance" ($5,000) provided by the Group Insurance Commission (GIC) is also included in this calcuation.
Based upon the Internal Revenue Service's Table 1, imputed income to the participant is $6.75 per month ($81 per year), illustrated as follows:
- Total Employer-Provided Group Term Life Insurance:
- ORP Coverage = $90,000
- Basic Life Insurance from the GIC = $5,000
- Total Insurance = $95,000
- Benefit Exceeding $50,000:
- $95,000 - $50,000 = $45,000
- Taxable Value of $45,000 Life Insurance Benefit:
- Monthly Cost from IRS Table 1 for Person Age 47 = $.015 per $1,000 of benefit
- Number of $1,000s = $45,000/1,000 = 45
- Taxable Imputed Income:
- 45 x $0.15 = $6.75 per month
Participants should contact a tax advisor with questions about how this tax relates to personal tax planning.
Related Links
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