What Is GTL on My Paycheck and How Is It Taxed?
Clarify Group Term Life (GTL) on your pay stub. Understand its nature, tax treatment, and how it impacts your earnings.
Many employees notice an item labeled “GTL” on their pay stubs and may wonder what it represents. This entry relates to Group Term Life insurance, a common benefit offered by employers. Understanding GTL is important because it can affect your taxable income and net pay, even though you don’t directly receive cash for it.
What Group Term Life Insurance Is
Group Term Life (GTL) insurance is a type of life insurance policy that an employer provides to its employees. This coverage offers a death benefit to designated beneficiaries if the employee passes away while the policy is active. It is termed “group” because a single policy covers multiple individuals, distributing risk across the group and often making premiums more affordable.
The “term” aspect means the coverage is for a specific period, typically while an individual is employed with the company. Employers often provide a base amount of GTL coverage at no cost to the employee as part of their benefits package. Employees may also have the option to purchase additional coverage for themselves or their family members, sometimes at a reduced group rate.
Why GTL Appears on Your Paycheck
GTL appears on your paycheck due to a concept known as “imputed income.” 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. Its value is added to your taxable wages.
The $50,000 threshold is set by Internal Revenue Code Section 79, which allows an exclusion for the first $50,000 of coverage. Any coverage above this amount, if the policy is carried directly or indirectly by the employer, results in imputed income. This imputed income is calculated based on IRS Premium Table I rates, which consider the employee’s age.
How GTL is Taxed
The imputed income from Group Term Life insurance is subject to specific payroll taxes. It is generally subject to Social Security and Medicare taxes. While the imputed income is added to your gross taxable wages for these purposes, it is typically not subject to federal income tax withholding or Federal Unemployment Tax (FUTA) withholding.
However, the imputed income is reported as taxable federal and state income on your Form W-2 at the end of the year. This inclusion in your taxable wages can lead to higher overall tax liabilities. The exact impact on your net pay depends on your tax bracket and other withholding factors.
Locating GTL Information on Your Pay Stub
You can typically find information about Group Term Life insurance on your pay stub, often under a section dedicated to “taxable wages” or “imputed income.” Look for line items specifically labeled “GTL,” “GTL Imputed Income,” or similar descriptions.
If you have difficulty locating this information or understanding the specific amounts, contacting your employer’s Human Resources or payroll department is advisable. They can provide detailed explanations regarding your company’s GTL policy and how it is reported on your pay statement. Payroll systems are designed to automate these calculations and report them accurately.