Premiums and Important Tax Information for Life/AD&D Insurance
Amount of Coverage
- The amount of this group life insurance is 2 x annual earnings* (salary + housing for ordained clergy), up to a maximum of $200,000
- *In order to adjust for actuarial risk, the amount paid in the event of death at age 65 is 65% of the original amount. At age 70 the benefit payable is 50% of the original amount. Monthly premiums are calculated accordingly.
Cost of Coverage
- Regardless of gender, age or occupation, a flat rate of 32 cents per month per thousand dollars of coverage is charged for the enrolled employee. If dependent life insurance has also been elected, add the appropriate amount ($2.00, $4.00, or $5.00) each month to obtain the total monthly premium.
Life/AD&D Calculation Examples
- A minister (under age 65) with a combined salary + housing of $57,000 per year, who elects coverage for themselves alone, receives $114,000 in life insurance protection for a monthly premium of $36.48 (114 x .32).
- An employee (under age 65) whose annual wages are $57,000.00 who has elected coverage for themselves plus a spouse/partner will be charged $36.48/mo. (114 x .32) plus $4.00/mo. = $40.48/month
- An employee (under age 65) whose annual wages are $28,000 who elects coverage for themselves alone, will have $56,000 of protection for a premium of $17.92 per month (56 x .32).
- An employee age 65 through age 69 whose annual wages are $60,000 per year who elects coverage for themselves alone, receives $78,000 in life insurance protection for a monthly premium of $24.96.
- An employee age 70 or older whose annual wages are $45,000 per year who elects coverage for themselves alone, receives $45,000 in life insurance protection for a monthly premium of $14.40.
Important Tax Information
It is an IRS requirement that the amount of life insurance over $50,000 be reported as taxable income. Any premium paid by the employee can be subtracted from the taxable amount as long as the premium is deducted from the paycheck on a post-tax basis.The taxable amount can be reported as imputed income on each paycheck or once on the final check of the year.
The amount to be taxed is based on the IRS chart found in IRS Publication 15-B The age of the employee determines the IRS rate, it is not based on the premium charged by the UUA for the coverage.
The UUA life insurance benefit is twice annual income. Income includes salary plus housing for ministers if applicable. No other income (retirement, health plan, LTD etc) is included in the income amount for life insurance. Based on the insured amount, anyone with income over $25,000 per year would have reportable imputed income. Included below is the information from Publication 15-B that is most useful for reporting purposes.
How to Report Coverage Over The $50,000 Limit.
You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Also, show it in box 12 with code “C.” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax.
Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. You must prorate the cost from the table if less than a full month of coverage is involved.
Table 2-2. Cost Per $1,000 of Protection For 1 Month
Under 25 $.05
25 through 29 $.06
30 through 34 $.08
35 through 39 $.09
40 through 44 $.10
45 through 49 $.15
50 through 54 $.23
55 through 59 $.43
60 through 64 $.66
65 through 69 $1.27
70 and older $2.06
The congregational-employer receives one monthly invoice for all employees' group and health coverage purchased through the UUA.
- Additional information regarding billing for the insurance plans