Posted: Mon Nov 17, 2008 10:46 pm Post subject: Employer Is Forcing 2x Salary Life Insurance
I work for an employer that has decided, this year, that they are going to GIVE us 2x salary group life insurance to us at no cost to us. For some of us older employees, the imputed income of this gift is a bit too much to swallow. The employer has not give us anyway to opt out. Is there any law that forces them to at least offer an opt-out or a $50K policy?
This not an uncommon 'benefit' I'm afraid I don't understand your problem with it...it's free (to you) right? so why do you not want it, or why would you want to opt out? _________________ **************************************
Life gaurantees a chance NOT a fair shake
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FIND a way EVERY day to lighten the load of another
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I think you have got it right tcope, otherwise why would anyone try to opt out from a free life benefit, if it’s not about taxes. May be little more information would help us to understand the situation better.
However, I doubt if there is any law against compulsory benefits offered by the employer. Normally, the employees insist upon receiving such benefits from their employer. You situation is somewhat unique.
While I understand your question I fail to see the problem as the imputed income rate for employees age 60 to 64 is .66 per thousand for the amount of life insurance above $50,000.
So if your are earning $125,000 per year your life insurance benefit would be $250,000. You'd be over the $50,000 limit by $200,000.
200 "thousands" multiplied by .66 = $132 per month of imputed income and assuming ObamaMan resets the top marginal tax rate at 40% that would result in you paying $52.80 in income taxes per month for that $250,000 life insurance benefit or about $634 in additional income tax.
That's not enough money to cause a 125k wage earner to lose any sleep over.
You didn't state your age or the amount of the life insurance benefit above $50,000 so there's no way to calculate the exact impact on your taxes but I think I've demonstrated it not enough to lose any sleep over.
And, YES, you should be able to opt out as most group plans only require a 75% participation rate of eligilble employees....at least that's the way it used to be, don't hold me to that.
Go ask the plan's administrator.
It won't be long and the Gubment will be taxing us when we break wind for our imputed contribution to natural air pollution. _________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
It won't be long and the Gubment will be taxing us when we break wind for our imputed contribution to natural air pollution
If that happens you'll find my entire family in the poor (albeit foul) house...
I still don't get the rub...you're not taxed on this benefit...it will show up in your company's 'benefit' package you know that thing they send out once a year that makes it look like you make twice what you do (salary plus benefits) but you aren't (as yet) taxed on any of that.. _________________ **************************************
Life gaurantees a chance NOT a fair shake
**************************************
FIND a way EVERY day to lighten the load of another
**************************************
Our Gubment wants the employEE to pay Federal Income Tax on the imputed value, meaning the cost of the premium paid, by the employER for group life insurance above $50,000.
OP's beef is he doesn't need or want the additional coverage and doesn't want to pay the IMPUTED income tax of the value of the group life insurance policy being provided by his employER.
He wants to either opt out OR just have $50,000. The maximun amount an employER can provide without imputing the value as income to the employEE. Value meaning the cost of the premium paid by the employer but ADDED to the employees wages for Federal Income Tax purposes.
They call it Internal Revenue Tax "CODE" for a reason.
Because everything is backasswards and convoluted.
Then the cubicle crowd with their cradle to grave mentality in Washington wonder why employers don't provide more company benefits?
Because it cost more money to keep up with their "CODE" than it's worth and the employers have a business to run! _________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
Our Gubment wants the employEE to pay Federal Income Tax on the imputed value, meaning the cost of the premium paid, by the employER for group life insurance above $50,000.
It's not a law yet though right? I read the link, but that's a soft ware sales pitch although I'm sure the calculations are right...it is not a law is it? or is it? I thought that was what the 'old guy' wanted, and pretty much lost the election for him.. _________________ **************************************
Life gaurantees a chance NOT a fair shake
**************************************
FIND a way EVERY day to lighten the load of another
**************************************
Taxation of employee fringe benefits has been on the books for some time.
It's a hidden tax the poli-tic-ill bass towards impose behind closed doors while they proclaim a "tax cut" when the news media cameras are rolling.
See the sample W-2 below, the little Box #1 that says, Wages, Tips, OTHER compensation? It's added in there so you don't even notice but the effect is that you are paying Federal Income Tax on some employer provided benefits above a certain amount.
Sneaky bass towards aren't they, those poli-tic-ill creeps?
Vote for me and I'll set you free! _________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
that's why i have a cpa, i hate this crap...correct me if wrong, but you are taxed on the benefit over 50k or on the premium over 50k...please don't make me read anymore links...you know, that money, and politics hurts my head...lets say (for ease of figuring) i make 50k a year, and i have this benefit for 100k the company premium is 120 a year....am i paying taxes on 50k or on 60 bucks? further say I'm 49 yrs old...(yes i read the above but still don't get it)...then what does this come down to dollars and cents at tax time...how much 'do it cost me' and further...isn't there some deduction we take or get for life insurance premiums too? thought i remember something about that...fine, now my head reallllllllly hurts.....(it's a good thing i'm cute ) _________________ **************************************
Life gaurantees a chance NOT a fair shake
**************************************
FIND a way EVERY day to lighten the load of another
**************************************
I am over 50 and while the calculations done by Gary above are correct, it is just one more thing that if I can control, I want to control. The bigger picture is that our raises at this company have not kept up with inflation, of course maybe now it doesn't matter, I have taken about a 4% decrease in salary due to the removal of on-call pay, and have had my pension benefits frozen. So when my employer says I want to help you by putting a further burden on you, I just want to scream.
This really is a headache...now I want to know how they come up with our OTHER wages. My hubby gets a form from his company every year stating the net worth of his job. This is actually a figure on there: other compensation.....hmmmm now my mind is running in circles...Paying taxes on benefits...Gosh they were right You live, You pay taxes and then you die. DEPRESSING
As evidenced by the responses on this thread most people don't realize that the cost of "some" employer paid benefits are included as TAXABLE INCOME to the employee.
In my example above and consistent with the sample W-2 form posted if the person had $25,000 in actual earnings the value of the life insurance benefit would be $1,584 for a total Box #1 wages, tips and OTHER compensation of 26,584 as GROSS INCOME.
If that person ends up in the 28% marginal tax bracket that means they paid $443.53 in additional Federal Income Tax for their "FREE" company benefit. _________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
As evidenced by the responses on this thread most people don't realize that the cost of "some" employer paid benefits are included as TAXABLE INCOME to the employee.
I had NO IDEA that this is going on! none----and what a freakin' crock.....
Quote:
If that person ends up in the 28% marginal tax bracket that means they paid $443.53 in additional Federal Income Tax for their "FREE" company benefit
Well now I'm triple pissed off! And I just re-up'ed and can't change anything for another year...OP, I'm sorry and I'm in the same boat as you, (sure we don't work for the same company ?)....I'll be watchin' that w2 this year for this and see how much this 'benefit' is costing us...
Gary, you didn't respond to my question
Quote:
isn't there some deduction we take or get for life insurance premiums too? thought i remember something about that
seems to me my cpa saying something about, 'we can deduct part of blah blah because some of it is life insurance premium'... _________________ **************************************
Life gaurantees a chance NOT a fair shake
**************************************
FIND a way EVERY day to lighten the load of another
**************************************
isn't there some deduction we take or get for life insurance premiums too?
No.
The company takes the tax deduction for the premium paid against their corporate income and YOU pay income tax on the imputed "value" of the life insurance premiums paid for by the company on life insurance above $50,000.
This wouldn't be a HUGE amount of money but I believe OP's point is it should be his choice whether to pay this hidden tax on the "FREE" company benefit OR opt out OR only be provided with $50,000 so as to NOT incur tax liability for something he doesn't need or want. _________________ Gary Spicuzza, *SAFE
Copyright 1956.
No rights reserved.
*Self Appointed Financial Expert
It won't be long and the Gubment will be taxing us when we break wind for our imputed contribution to natural air pollution. 
They call it Internal Revenue Tax "
Then the cubicle crowd with their cradle to grave mentality in Washington wonder why employers don't provide more company benefits? 
