I'm trying to set up our new employee benefit for group term life insurance. This is a new one for me so I could use some help/advice. Should I set up separate benefits for those employees with insurance under $50,000 and those with insurance over $50,000 (and thus have a small amount non-cash compensation)? Secondly, I'm curious how other organization have accounted for the taxable portion of the benefit i.e. as salary expense or insurance expense? Thanks in advance for your input! Michelle Anderson Sundance Institute

We handle this through an Excel spreadsheet which we do at the end of the year just prior to the last pay period input. We put the adjustment through as a one time pay so it impacts FICA and withholdings. It's pretty simple in Excel to create the spreadsheet for this. If you are interested, I can forward a copy of the spreadsheet to you.

Here's what I did. I set it up as a non-cash benefit and checked the "Group Term Life Insurance" box. In our plan, the potential payout is a multiple of the employee's annual salary, based on their age. So I the rate to be "Percentage of gross" and set the percentage to be a multiple of 100. For example, if the life insurance pays out five times the employee's annual salary, I set the percentage to be 500. I checked the box next to "Include amounts for this benefit in W-2 box:" and chose "Box 12" and code "C". For Federal taxes, I set it to "Withhold" for income tax, Social Security tax, and Medicare tax. (Our organization is exempt from FUTA.) I also set state income tax to "Withhold." Our insurance comes as part of our denomination's retirement plan. It's included in the contributions that we make to the employees' retirement accounts. So we don't separately account for the cost of the group term life insurance. On the G/L distribution tab, I just set the debit and credit accounts to be the same, so we don't record any additional expense. We used to do this with Excel and one adjustment near the end of the year. Because our insurance benefit is based on age, annual salary, and length of employment, the spreadsheet got rather complicated. Employees never really liked having extra tax withheld near the end of the year. Even if it was only another $20, they didn't appreciate that happening so close to Christmas. Now, it's spread out throughout the year. And, if an employee leaves mid-year, we've already done the withholding. Paul Higgins Green Lake Conference Center Green Lake, Wisconsin