What Does GTL Stand For on a Paystub?

A paystub serves as a detailed record of earnings, deductions, and contributions, providing insight into how gross pay translates into net pay. Decoding these figures helps individuals verify compensation accuracy and understand their overall financial picture. This transparency is important for budgeting and tax planning.

Understanding Group Term Life Insurance (GTL)

GTL on a paystub stands for Group Term Life insurance. This type of life insurance policy is typically provided by an employer as part of an employee benefits package. It offers a death benefit to designated beneficiaries if the insured employee passes away while covered. Many employers offer this benefit to their entire workforce, often at no direct cost to the employee or at a significantly subsidized rate.

Group Term Life insurance provides coverage for a specific period, usually while an individual is employed, distinguishing it from permanent life insurance. Unlike policies that build cash value over time, GTL policies generally do not accumulate any savings or investment component. Its appearance on a paystub indicates this benefit is provided, and may reflect any employee-paid premium. This employer-sponsored coverage is often more affordable than purchasing an individual term life insurance policy.

Tax Treatment of GTL on Your Paystub

Group Term Life (GTL) insurance, particularly for coverage exceeding certain amounts, involves specific tax treatment. The Internal Revenue Service (IRS) considers the value of employer-provided GTL coverage over $50,000 as “imputed income” to the employee. Though not received in cash, the value of coverage above the $50,000 threshold is treated as taxable income. This imputed income increases the employee’s gross taxable wages.

The IRS mandates a method for calculating this imputed income, utilizing IRS Table 2. This table provides a uniform premium cost per $1,000 of coverage based on the employee’s age, with the cost increasing for older age brackets. The calculation involves taking the coverage amount exceeding $50,000, dividing it by 1,000, and then multiplying that figure by the corresponding rate from IRS Table 2 for the employee’s age. This value is then typically added to the employee’s gross income on their paystub.

While this imputed income increases an employee’s taxable wages, it does not represent an actual cash payment received by the employee. The purpose is to account for the economic benefit derived from employer-provided coverage above the tax-exempt limit. This imputed income is subject to Social Security and Medicare taxes, commonly known as FICA taxes. However, federal income tax withholding on this specific amount is generally not required, although it is included in the employee’s total taxable income for federal and state income tax purposes.

Practical Implications for Employees

GTL’s presence on a paystub also affects its reporting on annual tax documents. If an employee receives GTL coverage exceeding $50,000, the imputed income amount is reported on their Form W-2. This value is included in Box 1 (Wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages). Additionally, this imputed income is reported separately in Box 12 of the W-2 form, identified by Code “C.” This reporting helps track the taxable benefit.

Employees should regularly review their paystubs and W-2 forms to ensure the accuracy of GTL entries. Verifying these amounts helps prevent discrepancies in tax filings and provides a clear picture of taxable earnings. Discrepancies could lead to issues during tax season.

GTL coverage is typically tied to employment. When employment with the providing company terminates, the GTL coverage usually ends. While some plans may offer options to convert the group policy to an individual policy, this is not universally available and may come with different terms and costs. Understanding non-cash benefits like GTL aids in personal financial planning.