Group-Term Life Insurance (The following information was copied from the Internal Revenue Service website.)
IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000. Amounts of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and are subject to social security and Medicare taxes. A taxable fringe benefit arises if coverage exceeds $50,000 and the policy is considered carried directly or indirectly by the employer. This benefit is taxable even if the employees are paying the full cost they are charged. You must calculate the taxable portion of the premiums for coverage that exceeds $50,000.
Fundware provides a Group Term Life Insurance data item in the Toolbox. It is named .GT LIFE. The calculation of group term life has nothing to do with the earning amount of the employee or how those earnings are distributed. It is based off the employee's age and the amount of coverage they have over $50,000. To calculate correctly, the employee must have employee data items in their Pay calculation tab for .BIRTH YR and .LIFE COV (the amount of their life policy). The calculation uses a 2nd historical data item, .AGE, and will take any dollars paid by the employee into account in data item TAX LIFE C.
The Historical Data Item Definition for .GT LIFE explains in the COMNT section what it is using, and details what needs to be added for taxing purposes. When a payroll, or test payroll is in the net pay calculation stage, a calculation trace report can be run for .GT LIFE To see exactly what figures it is pulling to arrive at the final taxable amount.