MMC Benefits Handbook
Cost of Coverage
How much do I have to pay for coverage?
There is no cost to you for Basic Life Insurance. The Company pays the entire cost.
Is my coverage subject to tax?
Current federal tax laws generally consider an employer's cost for life insurance in excess of $50,000 to be taxable income or imputed income, to the employee.
Any imputed income resulting from Company-paid Basic Life Insurance will be reflected on your pay stub and on your year end W-2 form.
Imputed income does not apply if you designate a qualified charitable organization as the beneficiary of your coverage during the entire calendar year. You must submit proof that the organization meets the IRS definition of a charitable organization.
Is the Company's cost for Basic Life Insurance taxable to me?
Under current federal tax laws, the Company's cost for Basic Life Insurance coverage in excess of $50,000 is considered taxable income—or "imputed income"—to you.
For example, if your salary is $61,300, your Company-paid Basic Life Insurance coverage amount is $62,000. The portion of this amount above $50,000—that is, $12,000—is subject to imputed or taxable income treatment under IRS rules.
The following table shows how the IRS determines the monthly imputed income to employees per thousand dollars of Company-paid life insurance amounts above $50,000.
Monthly Cost Per $1,000 of Insurance Above $50,000
|
Age*
|
Monthly Rate
|
|
Under 25
|
$.05
|
|
25-29
|
$.06
|
|
30-34
|
$.08
|
|
35-39
|
$.09
|
|
40-44
|
$.10
|
|
45-49
|
$.15
|
|
50-54
|
$.23
|
|
55-59
|
$.43
|
|
60-64
|
$.66
|
|
65-69
|
$1.27
|
|
70 and above
|
$2.06
|
* For purposes of this calculation, your age in the current calendar year is assumed to be in effect for the entire calendar year. For example, if you turn age 40 on June 1, 2007, your age is assumed to be 40 from January 1, 2007 to December 31, 2007.
How is imputed income shown on my pay slip?
Your dollar amount of imputed income, if any, is calculated every payroll cycle and is reflected on your pay slip, itemized as "Basic Life Imputed Income." It's also reported on your year-end W-2 form as a component of taxable income from the Company.
Is the benefit payment taxable?
The benefit payment, including the Accelerated Benefit Option, is not subject to federal income taxes and in most cases state income taxes.
The death benefit may be subject to federal estate taxes.
Tax rules change from time to time. Please note that the information contained in this Summary Plan Description must not be construed as tax advice, which you can receive only from a professional tax advisor, who should be consulted on federal and state income, gift and estate tax questions.