What Does G.T.L. Mean on Your Paystub?
Decode G.T.L. on your paystub. Understand what this common payroll entry signifies, how non-cash benefits are taxed, and its true impact on your take-home pay.
G.T.L. on a paystub often prompts questions. This entry reflects a specific benefit provided by your employer. Understanding what G.T.L. stands for and its implications can help clarify your paystub deductions and taxable income. This article explains the meaning behind G.T.L. and how it might affect your financial picture.
What GTL Represents
G.T.L. on your paystub stands for “Group Term Life Insurance.” This is a life insurance policy an employer provides to a group of employees under a single contract, often at little to no direct cost. Its purpose is to provide financial protection to your designated beneficiaries in the event of your death. It offers a death benefit payout, which can help your loved ones manage expenses like funeral costs, income replacement, or outstanding debts. This coverage is generally more affordable than individual life insurance policies because the risk is spread across a large group.
Understanding Imputed Income
While employer-provided group term life insurance is a valuable benefit, the Internal Revenue Service (IRS) considers the value of coverage exceeding a certain amount as “imputed income.” Imputed income refers to the value of non-cash benefits an employee receives from their employer that must be treated as taxable income, even though no cash is actually received. The IRS mandates that the value of employer-provided group term life insurance coverage above $50,000 is considered a taxable non-cash benefit. This $50,000 threshold exists to prevent employers from providing unlimited tax-free benefits. If your employer provides more than $50,000 in group term life insurance coverage, the value of the coverage above that limit is added to your taxable wages.
How GTL Imputed Income is Calculated
The calculation of GTL imputed income uses a specific method outlined by the IRS. The IRS provides a “Uniform Premium Table” in IRS Publication 15-B, which assigns a monthly cost per $1,000 of coverage based on the employee’s age. This table ensures a standardized approach to valuing the benefit for tax purposes.
To calculate the imputed income, first determine the amount of coverage exceeding $50,000. This excess is then divided by 1,000 and multiplied by the applicable monthly rate from the Uniform Premium Table for your age bracket. This monthly cost is then multiplied by the number of months the coverage was in effect.
For instance, if a 45-year-old employee has $100,000 in coverage, the excess is $50,000. If the IRS Table rate is $0.15 per $1,000, the monthly imputed income is ($50,000 / $1,000) $0.15 = $7.50. Any amount the employee contributes with after-tax dollars reduces the calculated imputed income.
Tax Impact on Your Paycheck
The calculated GTL imputed income directly affects your taxes and how they appear on your paystub. This amount is subject to Social Security and Medicare taxes, collectively known as FICA taxes. Even though you don’t receive this value as cash, it increases your taxable wages for FICA purposes, leading to a slightly higher FICA deduction from your net pay.
For federal income tax, GTL imputed income is also considered taxable income. Employers have the option to withhold federal income tax on this amount, but it is not mandatory. Regardless of whether federal income tax is withheld, you are still responsible for paying income tax on this imputed income when you file your annual tax return.
On your Form W-2, the GTL imputed income is included in Box 1 (Wages, Tips, Other Compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages). This amount is also reported separately in Box 12 with Code “C.” While GTL provides a valuable benefit, it can slightly reduce your net pay due to the increased FICA tax obligations.