When employer-provided group term life insurance (GTLI) exceeds $50,000 for an employee, the value of the excess coverage (as determined by the IRS) must be reported as income, minus any after-tax premiums paid by the employee.
How to setup a Group Term Life earning code
Navigate to the following path to add the earning:
Company Settings > Payroll Setup > Earning Codes
If the code isn’t already setup on the company, click "Add New Earning Code" in the upper right corner.
In the Roll up Earning box, select “Custom Taxable Fringe”. You should now see this box:
Select "OK" . Rename the Earning code, and change the W2 Box Type to the following setting:
Click "SAVE" . In the Tax Settings box, click "ADD TAX SETTING".
For Federal taxes, Group Term Life is exempt from FUTA, and taxable for everything else. Code accordingly:
Each state’s income tax, local tax, and worker’s compensation taxation varies – get the taxability from the client.
How to input in payroll
Because Group Term Life is partly taxable, the premium of the coverage amount over $50,000 needs to be recorded in a current payroll’s existing check.
