Can I give my employees a monthly credit for getting life insurance?

Jun 13, 2019

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Can I give my employees a $50 monthly credit for getting life insurance? And can I write it off as business expense or employee compensation?

Payment to an employee for the purchase of life insurance, or giving an employee a life insurance policy, is basically providing an “employee benefit.” Generally, unless an employee benefit is provided by the use of an approved IRS employee benefit plan, that employee benefit would be taxable as compensation to the employee. Yes, it could be written off as a wage expense, but consider that both the employee and the employer will bear wage tax costs on those insurance payments.

There is a provision in the Internal Revenue Code for an employer to provide for the cost of group term life insurance coverage on employees up to $50,000 each that can be excluded from taxable wages. That insurance coverage may be deducted by the employer as an employee benefit plan. The group term life insurance policy must be for at least 10 full-time employees at some time during the year. An exception to the 10-employee rule applies if all full-time employees are covered with certain coverage requirements.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Robert D. Hornick, CPA, is with Hornick & Associates LLC in Philadelphia.

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