What Does It Mean When GTL Is on Your Paystub?
Learn what "GTL" means on your paystub. Understand how this common employer benefit affects your taxable income and financial reporting.
A paystub serves as a detailed record of an employee’s earnings and deductions for a specific pay period. Understanding each line item on this document is important for managing personal finances and ensuring accuracy. Among the various entries, “GTL” sometimes appears, which can be a source of confusion for many individuals.
Understanding Group Term Life Insurance
Group Term Life (GTL) insurance is a type of life insurance policy that employers frequently offer to their employees as part of a benefits package. This coverage is characterized by a single contract that extends to multiple individuals within a group, such as a company’s workforce. Employers often provide basic GTL coverage at little to no direct cost to the employee, making it an accessible benefit.
The policy provides a death benefit to designated beneficiaries if the insured employee passes away while covered. Unlike individual life insurance, GTL coverage remains in effect for the duration of employment and often terminates when an individual leaves the company. This insurance is more affordable than individual policies due to the group rate and typically does not require a medical exam for basic coverage amounts.
Why GTL Appears on Your Paystub
GTL appears on a paystub due to specific Internal Revenue Service (IRS) regulations concerning employer-provided benefits. While employer-sponsored GTL is a valuable benefit, the IRS considers the value of coverage exceeding $50,000 to be a taxable non-cash benefit. This means that if an employer provides GTL coverage above this $50,000 threshold, the excess amount is treated as “imputed income.”
Imputed income represents the monetary value of a non-cash benefit added to an employee’s gross wages for tax calculation purposes. This amount increases the employee’s taxable income, even though the employee does not physically receive this money. “GTL” or “Imputed Income – GTL” is displayed on the paystub to reflect this addition to taxable wages, influencing the taxes withheld without directly affecting net take-home pay.
Calculating Imputed Income for GTL
The calculation of GTL imputed income is determined by specific guidelines set forth by the IRS. Employers utilize a uniform premium table, known as IRS Table I, to ascertain the taxable value of GTL coverage exceeding $50,000. This table provides a cost per $1,000 of coverage, which varies based on the employee’s age.
To calculate the monthly imputed income, the amount of GTL coverage above the $50,000 exclusion is identified. This excess amount is then divided by $1,000 and multiplied by the corresponding rate from IRS Table I for the employee’s age bracket. For instance, if an employee has $75,000 in coverage, the taxable portion is $25,000, which is then multiplied by the Table I rate for their age.
Tax Implications of Imputed Income
The imputed income from GTL has direct implications for an employee’s tax obligations. This amount is subject to Social Security and Medicare taxes, collectively known as FICA taxes. It is also subject to federal income tax withholding, meaning a portion of these taxes will be deducted from the employee’s actual wages.
Depending on the jurisdiction, this imputed income may also be subject to state and local income taxes. At the end of the year, the total imputed income from GTL is included in the employee’s gross income reported on their W-2 form, increasing their overall taxable income. While the employee does not receive the imputed income as cash, it influences the total amount of taxes for which they are responsible.