Employers may choose to offer life insurance benefits to their employees. If this optional benefit is one you are thinking of offering, you will have to determine who should be covered, what type of life insurance benefits to offer and how much life insurance is optimal and affordable.
A popular employee benefit for both employers and employees is life insurance. Offering it is completely optional but worth considering if you and your employees can benefit from the possible lower rates of insuring a group. If you're considering including life insurance in your employee benefit package you will have several coverage issues to consider, including whom to cover and the type and amount of coverage to offer. The next step will require finding vendors and making sure the plan is properly administered.
A popular employee benefit for both employers and employees is life insurance. Offering it is completely optional but worth considering if you and your employees can benefit from the possible lower rates of insuring a group. If you're considering including life insurance in your employee benefit package you will have several coverage issues to consider, including whom to cover and the type and amount of coverage to offer. The next step will require finding vendors and making sure the plan is properly administered.
Who Should Be Covered?
Once you've decided you may want to offer life insurance, you need to decide which employees will get these benefits. You may want to offer group-term life insurance benefits to all your full-time employees, especially if you can get lower rates (and avoid individual medical exams) with a bigger group.
If you only want to offer life insurance as a special benefit to a few key employees, you won't be able to deduct the premiums for federal tax purposes, unless you can meet special nondiscrimination requirements.
What are the nondiscrimination requirements you must meet? Generally, nondiscrimination requirements are designed to discourage you from providing benefits only to the most highly compensated employees or providing benefits that limit lower compensated employees from participating because of the price of the benefits. In the case of group-term life insurance, a plan does not discriminate as to an employee's eligibility to participate if any of the following conditions are met:
- The plan benefits at least 70 percent of all employees.
- At least 85 percent of all participating employees are not key employees.
- The plan benefits employees who qualify under a classification that is set up by the employer and found by the IRS not to discriminate in favor of key employees.
In the case of group-term life insurance, the most commonly offered type of employer-provided life insurance, you can offer life insurance to small sub-groups of employees if the distinctions are based on:
- marital status
- job duties
- compensation
- length of service
- participation in a pension, profit-sharing, stock bonus, or accident and health plan
- other employment-related factors
Read more at : http://www.bizfilings.com/toolkit/sbg/office-hr/managing-the-workplace/life-insurance-as-an-employee-benefit.aspx
Offering life insurance as an employee benefit
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