Group Life and Disability Insurance Flashcards

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1
Q

Group Term Life Insurance

A

Part of compensation to employee
First 50k tax free

  • Must provide death benefit excludable from gross income
    -group of employees as compensation for services
    -provided by policy directly or indirectly
    -computed under a formula and can’t exclude unless non employee
    (services for commission only can be excluded)
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2
Q

Group Whole Life

A

Taxed to employee W2 income on premiums paid

Premiums are deductible by employer if nonforfeitable

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3
Q

Dependent Coverage

A

Not included in the 50k exemption

Tax free if doesn’t exceed $2000

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4
Q

Taxes Group Term

A

Employee -tax free up to 50K
- over 50K taxed on cost (based on table-50K)
- must pay FICA/FUTA on amount over 50K
-amount over 50k and included in income
reported on W2
-premium is deductible

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5
Q

Discriminatory Term Plans

A

If discriminatory toward key employees - key employee must include:
Greater of actual cost of insurance or cost determined from table (annual amount)
Key employees lose 50k exclusion

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6
Q

Assignment of Group Term

A

Employee assigns policy, giving up all incidents of ownership, including naming benes, terminating and right to convert….after 3 years excluded from estate.

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7
Q

Carve Out Plans

A

Highly compensated employees are “carved-out”
Individual policies are provided for them
Cheaper
Usually Split Dollar, IRC Section 162 Bonus, or Death Benefit Only

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8
Q

IRC Section 162 Bonus

A

Employee purchases and owns life ins
Employer pays premium-deductible/taxable to employee
Employee pays income tax on premium with no cash so second bonus is issued to cover tax.

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9
Q

Group Disability Plans

A
Employer pays premium in most cases
Taxable to employee
Short Term and Long Term Policies
Short term start 1-8th day of illness - 13,26,52 weeks
Long term 30days, 2years-age 65

paid monthly
LTD capped

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10
Q

Planning- increase coverage disability

A

obtain individual policy first then group disability. Individual can’t be reduced if group obtained later

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11
Q

SSI Disbility Definition

A

Can’t engage in any substantial employment
Subject to waiting period - beginning 6th full calendar mo (5 mo waiting)
Expected to be disabled for at least 12 mo

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