What Is GTL (Group Term Life) on My Paystub?
Understand the GTL line on your paystub. Learn about employer-provided Group Term Life insurance and its unique taxable income considerations.
A paystub details an employee’s earnings and deductions, itemizing gross wages, taxes, and other deductions. Among its entries, you might see “GTL,” which stands for Group Term Life. This employer-provided benefit can have implications for your taxable income.
Understanding Group Term Life Insurance
Group Term Life (GTL) insurance is a type of life insurance policy that an employer provides to its employees, typically as part of a comprehensive benefits package. This insurance offers coverage, often on an annual basis, to provide financial protection to designated beneficiaries if the employee dies while employed.
Employers usually provide this benefit at little to no direct cost to the employee, making it an attractive component of compensation. The coverage amount can vary significantly, often tied to an employee’s salary or a flat amount for all employees. It helps beneficiaries manage financial obligations.
Calculating Taxable Imputed Income
What is Imputed Income?
The Internal Revenue Service (IRS) considers the value of employer-provided Group Term Life insurance coverage exceeding $50,000 as taxable “imputed income” to the employee. Imputed income represents the value of a non-cash benefit added to an employee’s gross income for tax purposes. This rule is outlined in Internal Revenue Code Section 79.
Calculating Imputed Income
To calculate this imputed income, the IRS provides a Uniform Premium Table. This table assigns a cost per $1,000 of coverage based on the employee’s age, categorized into five-year age brackets. The employee’s age on December 31 of the calendar year is used for this calculation.
Adjustments and Impact
The calculation involves subtracting the $50,000 tax-free exclusion from the total coverage amount provided by the employer. The remaining excess coverage is then divided by $1,000, and this result is multiplied by the applicable rate from the IRS Uniform Premium Table for the employee’s age group. Any after-tax amounts the employee pays towards the coverage during the year will reduce this imputed income amount. This calculated amount is subsequently added to the employee’s taxable wages, but it is not a cash deduction from their net take-home pay.
Reporting Group Term Life on Your Paystub and Taxes
The taxable imputed income from Group Term Life insurance will typically appear on your paystub, though the exact label can vary. Common designations include “GTL,” “Imputed Income,” or “Taxable GTL.” This entry primarily serves to increase your gross taxable wages for the pay period, rather than representing a deduction from your net pay.
At the end of the year, this imputed income is reported on your Form W-2. It is included in Box 1, which represents your total “Wages, tips, other compensation.” Additionally, the specific amount of taxable Group Term Life insurance is reported in Box 12 of the W-2, identified by Code “C.”
Because this imputed income is added to your taxable wages, it is subject to federal income tax. It is also subject to Social Security and Medicare taxes (FICA taxes). While it impacts federal employment taxes, this imputed income is generally not subject to state or local income taxes, though it is reported for state income tax purposes on the W-2.