Imputed income amounts for Basic and Voluntary Life plans are calculated using the volume of coverage on the plan (V) and an age-banded rate (r), which is determined by the IRS using the employee’s age on the last day of the employee’s tax year.
| IRS Regulation 79 Table 1: Rates for Group Term Life | |
| Age Bracket | Monthly Cost per $1000 of Coverage over $50,000 (r) |
| <25 | $ 0 .05 |
| 25 to 29 | $ 0 .06 |
| 30 to 34 | $ 0 .08 |
| 35 to 39 | $ 0 .09 |
| 40 to 44 | $ 0 .10 |
| 45 to 49 | $ 0 .15 |
| 50 to 54 | $ 0 .23 |
| 55 to 59 | $ 0 .43 |
| 60 to 64 | $ 0 .66 |
| 65 to 69 | $ 1 .27 |
| 70+ | $ 2 .06 |
Imputed Income amount (per month) = ((V-$50,000) / 1000) * r
Both V and r can change throughout the plan year according to the carrier’s rate redetermination schedule.
Example
Basic Life Plan
A 45-year-old employee receives $200,000 of Basic coverage which is paid entirely by his employer. His imputed income for this coverage is $270, which is entered into boxes 1, 3, 5 of the employee’s W-2, and in box 12 with a code “c”.
Excess coverage = 200,000 - 50,000 = $150,000 Monthly imputed income = (150,000 / 1000) * .15 = $22.50 Yearly imputed income = 22.50 x 12 = $270
Voluntary Life Plan
A 45-year-old employee pays $100 per year for $200,000 in Voluntary Life insurance. The $200,000 of coverage is reduced by $50,000. The yearly cost of $150,000 of coverage is $270 ($ 0 .15 x 150 x 12), and is reduced by the $100 he pays for the insurance, $170 total. The employer includes $170 in boxes 1, 3, and 5 of the employee’s W-2, and in box 12 with code “C.”
Please refer to this IRS page and subsequent publication for more information. You will need to consult with a Tax Professional if you have any specific questions about how Imputed Income is calculated.
