What Does GTL Mean on a Pay Stub and Why Is It There?

Understanding the various entries on a pay stub is important for managing personal finances. A pay stub can contain numerous acronyms and entries that might initially appear unfamiliar or confusing. Deciphering these components provides insight into earnings, deductions, and benefits, ensuring an accurate financial picture.

Understanding GTL

GTL on a pay stub stands for Group Term Life insurance. This is a type of life insurance policy that an employer provides to a group of its employees. It typically serves as a common employee benefit, offering a death benefit to designated beneficiaries if the employee passes away while covered under the policy.

Group Term Life insurance is distinct from individual life insurance policies, as it is offered to a collective group rather than to individuals. While often a valuable benefit, the specifics of the coverage, such as the amount provided, can vary significantly between employers.

Why GTL Appears on Your Pay Stub

While employer-provided group term life insurance is a benefit, its appearance on your pay stub stems from specific tax regulations. The Internal Revenue Service (IRS) considers the value of employer-provided group term life insurance coverage exceeding $50,000 to be a taxable, non-cash benefit. This amount over the $50,000 threshold is referred to as “imputed income.”

Imputed income, though not a direct cash payment, represents a value added to an employee’s taxable wages and is included in their gross income for tax calculation purposes. The presence of GTL on a pay stub therefore indicates that the employee’s group term life insurance coverage exceeds the $50,000 tax-exempt limit, making the excess portion subject to taxation.

Tax Implications of GTL

The value of the imputed income for GTL is determined using IRS Uniform Premium Table I, as outlined in Internal Revenue Code Section 79. This table provides a standardized cost per $1,000 of coverage based on the employee’s age, with older employees having a higher imputed value for the same amount of excess coverage.

This imputed income is subject to various payroll taxes. It is specifically subject to Social Security and Medicare taxes, commonly known as FICA taxes. Additionally, this amount is subject to federal income tax withholding and, depending on state regulations, state income tax withholding. These taxes are withheld from the employee’s regular cash wages, as the imputed income itself is not a cash payment.

The imputed cost of group term life insurance is reported on an employee’s Form W-2. Specifically, it is included in Box 1 (Wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages). This amount is also separately identified in Box 12 with Code “C,” which signifies the taxable cost of group-term life insurance over $50,000. Employees should review their W-2 for this entry and contact their payroll department or a tax professional if they have questions about their specific GTL amount.