first calculated using Table I costs (on front page) and the actual contribution made by the
employee, if any, is subtracted. Several examples follow:
Example A. An employee is age 42 and is insured for $80,000 of group term life. The
employee’s contribution is 20 cents per month per $1,000. The Table I cost is $0.10 times
30 (the amount of coverage in excess of $50,000 in thousands) or $3.00 per month.
Because the employee contributes $16 per month ($80,000 x $0.20), the employee’s
contribution more than offsets the Sec. 79 cost; thus, there is not an amount to be included
in the gross income of the employee.
Example B. An employee is age 60 and is covered for $80,000 of group term life. The
employee’s contribution is $0.20 per month per $1,000 or $16.00. The Sec. 79 Table I cost
is $19.80 per month (30 times $0.66), which exceeds the employee’s monthly contribution
by $3.80. Therefore, the employee must include in the taxable income for the year $45.60
($3.80 is a monthly cost, multiply by 12 for an annualized amount), representing employer
contributions for the excess group term life insurance coverage.
Example C. An employee is age 45 and is insured for $80,000 of group term life. The
employee does not contribute towards the cost of the insurance. The Sec. 79 Table I cost is
$4.50 per month (30 times $0.15). The employee must include in the taxable income for the
year $54.00 ($4.50 x12).