Issued: Nov 2, 2004
Modified: Oct 11, 2007

U.S. - BENEFITS

TABLE I*
Calculating Imputed Income for Core Life Insurance Amounts Exceeding $50,000


While core life insurance coverage (one times your FLEX Earnings) is provided at no cost to you, it may affect your taxes. Coverage amounts above $50,000 for employee life insurance are assigned a value based on the IRS's Table I, below. That value will be reported as "other compensation" on your W-2 Form and treated as taxable income.

If you are this age on December 31

Your monthly "imputed cost" for every $1,000 of coverage is

Under 25

$.05

25 to 29

.06

30 to 34

.08

35 to 39

.09

40 to 44

.10

45 to 49

.15

50 to 54

.23

55 to 59

.43

60 to 64

.66

65 to 69

1.27

70 and above

2.06

* Subject to change per IRS regulations.

To calculate your imputed income, use the following worksheet. We have provided an example to help you. The example assumes the employee is age 42, with FLEX Earnings of $75,000.

 

Example

Your Calculations

  1. Your core life insurance amount (one times your FLEX Earnings)

 $75,000

 

  1. Subtract $50,000 (untaxed coverage)

- 50,000

- 50,000

  1. Subtotal

= $25,000

 

  1. Divide line 3 by $1,000

= 25

 

  1. Multiply line 4 by the Table I cost for your age

.10

 

  1. Monthly imputed cost for life insurance in excess of $50,000

= $2.50

 

  1. Multiply line 6 by 12 for your annual imputed cost

X 12

 X 12

  1. Annual imputed cost included in your income, reflected on your W-2 Form.

= $30.00

 

How much tax you pay on your imputed income depends on your tax bracket. In the example, suppose the employee is in a 28% income tax bracket. This employee would owe $8.40 a year in imputed income tax (28% of $30.00).

To avoid this tax, you may elect $50,000 of coverage when you first enroll, when you have a status change, or during the annual enrollment period. If you do so, you will not be eligible to elect any optional life insurance coverage.

You may want to weigh this imputed income tax against the life insurance coverage you and your family need, and whether you may want to get optional coverage in the future.