All full-time employees have life insurance paid for by Clinton City Schools. The policy is for two-times an employee's annual salary (maximum of $175,000).
The value of the life insurance policy creates a taxable event that is calculated and added to the December pay period. This can affect the FICA taxes only for this pay period. The employee might notice a slight decrease in net pay for the month of December only. If the life insurance coverage value is greater than 50,000 the IRS considers the excess (value over 50K) to be a "taxable fringe".
The amount of "taxable fringe" depends on the following factors:
- How much excess is involved (how much over 50K)?
- Your age- all other variables equal; the older you are, the more the "value" of the life insurance.
- How many months you were covered (did you work the entire calendar year?).
This calculation results in a "non-cash" increase to your FICA taxable income only. The increase will cause a slight increase in your SS tax and Medicare tax on December payroll only. This calculation is completed in December in order to be included in your Calendar Year W-2 tax statement used to prepare your filing requirements with the IRS.
Please make sure that you change your elected beneficiary for any "life-event changes" such as divorce, marriage, death of a beneficiary, the birth of a beneficiary, etc. Contact Kim Leach in the central office for needed changes. (this can apply to your TCRS and other retirement accounts as well).