What Does GTL Mean on a Paycheck Stub?

When reviewing your paycheck stub, you might encounter an unfamiliar abbreviation: GTL. This stands for Group Term Life insurance, and its appearance on your pay stub can often cause confusion. It represents a non-cash benefit provided by your employer, and understanding its implications is important for comprehending your total compensation and tax obligations.

What Group Term Life Insurance Is

Group Term Life (GTL) insurance is a type of life insurance policy that an employer offers to its employees. It typically functions as a benefit of employment, often at no direct cost or a reduced cost to the employee. The primary purpose of GTL is to provide a financial payout, known as a death benefit, to designated beneficiaries if the insured employee passes away during the coverage period.

This insurance is usually “term” life insurance, meaning it covers a specific period, often tied to the duration of employment. Employers typically cover the premiums for GTL policies as part of their benefits package.

Why GTL Appears on Your Paycheck

Even though Group Term Life insurance is a non-cash benefit, it appears on your paycheck stub for reporting and tax purposes. Employers are required to track and account for the value of certain benefits provided to employees. This ensures compliance with Internal Revenue Service (IRS) regulations.

The GTL entry on your stub might show up as “imputed income,” “non-cash earnings,” or sometimes as a deduction, even though no money is directly exchanged for it. Employers include it to properly record the benefit’s value. This reporting ensures that any potential tax implications are correctly handled.

Understanding GTL Imputed Income

The concept of “imputed income” applies to Group Term Life insurance when the coverage exceeds a specific threshold. While employer-provided GTL coverage up to $50,000 is not taxable to the employee, any coverage amount above this $50,000 limit is considered a taxable non-cash benefit by the IRS. This rule is outlined in Internal Revenue Code Section 79.

Imputed income represents the monetary value of a non-cash benefit that must be added to an employee’s taxable wages. Its value is treated as if you received cash for federal income tax and Federal Insurance Contributions Act (FICA) purposes, which include Social Security and Medicare taxes. The employer calculates this value and includes it in your gross income for tax calculations.

How Imputed Income is Calculated

The calculation of imputed income for Group Term Life insurance coverage exceeding $50,000 follows a formula set by the IRS. This calculation uses the Uniform Premium Table, which provides monthly per-$1,000-of-coverage costs based on the employee’s age. The employee’s age at the end of the calendar year is used for this determination.

To calculate the monthly imputed income, first subtract $50,000 from the total amount of your employer-provided GTL coverage. Then, divide this excess amount by 1,000 to determine the number of $1,000 units. This result is then multiplied by the applicable rate from the IRS Uniform Premium Table for your age group.

For example, if an employee is 40 years old and has $100,000 in GTL coverage, the excess coverage is $50,000 ($100,000 – $50,000). Dividing this by $1,000 yields 50 units. If the Table 203 rate for a 40-year-old is $0.10 per $1,000 of coverage, the monthly imputed income would be $5.00 (50 units x $0.10). This amount is then added to the employee’s gross income for tax purposes. If the employee pays any after-tax contributions towards the insurance, that amount can be subtracted from the calculated imputed income.