What is the tax implication for employer-paid premiums in group life insurance?

In the context of employer-paid premiums for group life insurance, the choice stating that they count as taxable income if they exceed $50,000 is accurate. This is because the IRS allows a certain amount of group term life insurance coverage—specifically, up to $50,000—to be provided tax-free to employees. However, any coverage amount over that threshold is considered a taxable benefit and must be reported as income. This rule is intended to prevent an unlimited tax-free benefit for life insurance provided through employers, aligning with regulations that define the tax treatment of employer-provided fringe benefits.

Understanding this tax implication is crucial for both employers and employees, as it can affect payroll tax calculations and personal income tax reporting for employees who receive these benefits. This scenario often arises in employer-sponsored group life insurance plans, where the employees may be unaware of the tax consequences of coverage exceeding the set limit.