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ORP Insurance Taxation Issues

Group Life Insurance

Imputed Income

The value of employer-provided Group Term Life Insurance in excess of $50,000 is generally considered "imputed income" and is therefore subject to income tax reporting at the end of each year.

The amount of imputed income is determined outside the two payroll systems for individual Participants and then input by Campus Administrators into their respective payroll system.

More information is available in the Participants' section of this website.

Death Benefits

Proceeds from the Group Term Life Insurance policy are not subject to current income taxes for the deceased Participant’s beneficiaries.

Accelerated Death Benefits

Proceeds from the Group Term Life Insurance policy that are distributed to the Participant are not subject to current income taxes.

Long-Term Disability Insurance

Monthly Income Benefits

Monthly Income Benefits are subject to current income tax for disabled Participants. This is because the Commonwealth pays the full premium for the coverage.

Annuity Premium Benefits

Annuity Premium Benefits (the continued retirement plan contributions) are not subject to current income tax. However, these funds are subject to income tax when withdrawn from the Participant’s retirement account.

 

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