GROUP INSURANCE
Group Life Insurance
Generally, group life insurance must meet certain basic
requirements It should be
provided only to a group of employees as additional compensation
for their personal
services. The insurance would be provided under a policy carried
by the employer. The
amount of coverage for each employee must not allow for
discrimination of key employees.
The formula to determine benefits must be based on age, years of
service, compensation,
etc., not solely identifying the key employees. Coverage may be
employer or employee paid,
or a combination of both.
Premiums paid by an employer for employee life insurance
coverage are deductible by the
company under a group policy. The value of the coverage provided
by the employer is not
taxable as income to the employee if properly designed, for up to
$50,000 of death
benefits. For amounts over $50,000 of employer-paid coverage the
employee would have
taxable income based on Table I rates, which are nominal age
based rates per $1,000 of
insurance under which the IRS computes the value of the coverage.
Death benefits of the policy are paid directly to the named
beneficiary or estate of
the deceased employee.
Group Medical Insurance
Premiums paid by the employer are both deductible by the
business and non-taxable
to the employee, if properly designed.
Benefits are often paid directly to the health care provider
and are not taxable to the
employee. If the employee is reimbursed for medical expenses he
has paid, these proceeds
are also non-taxable.
It is important that employees become familiar with their
medical plan as many plans
only pay benefits for services rendered by a particular group of
health care providers or
may pay a reduced benefit if non-contracted providers are used.
Group Long-Term Disability Insurance
Group long-term disability insurance can be a
cost-effective way of providing
protection for employees. The rates are generally lower than
those that could be obtained
on an individual basis.
The premiums are generally tax-deductible to the employer.
Although the value of the
coverage will generally not be taxable to the employee, benefits
received by a disabled
employee will generally be included as income. Benefits, which
are usually a percentage of
salary, may not be sufficient coverage. It may be necessary for
an employee to obtain a
personally owned disability insurance policy for complete
coverage.
