Benefits Compliance Question

Question: Is life insurance excludable from an employee’s gross income (non-taxable)?

Answer:  Under Internal Revenue Code section 79, the cost of the first $50,000 of life insurance coverage is excludable from an employee’s gross income.  (26 U.S.C. § 79(a)(1).)  This applies only to group-term life insurance policies for the life of the employee (not the life of an employee’s spouse or dependent) carried directly or indirectly by the employer through a nondiscriminatory plan.  For any cost of life insurance coverage that is above $50,000, the cost is taxable and included in the employee’s gross income.  This includes employer contributions to life insurance policies above $50,000.