Conference 7.286::digital

    The basic life insurance is something Digital provides at no cost to 
    you. However, it's a (taxable) benefit. But they're allowed to give you
    $50000 worth of insurance before you incur any tax liability.
    
    Because of the tax liability on the premiums for the excess over
    $50000, Digital gives you a choice (began last year when CIGNA came
    into the picture and the open enrollment at that time). The choice is:
    take the full 1*salary insurance (well, actually for certain people
    it's 2*salary, as discussed elsewhere), and pay the tax on the excess
    premium if your salary is over $50000; or, limit your basic life
    insurance to $50000 and avoid the tax liability.
    
    The additional money *you* pay each week to get up to five times salary
    in life insurance is not part of this issue. That is paid with
    after-tax dollars, and you're not being taxed again on that.
    
    hth
    
    - Richard.

    You read it wrong.
    
    You are not being taxed on the optional up-to-5-times-salary insurance
    that you pay for.  You are being taxed on the premiums that Digital
    pays if you elected to have the standard insurance they pay for which
    is double [?] your salary and which you could have capped at $50,000
    instead of going to the actual higher number. If you chose to cap this
    Digital-provided life insurance at $50k, then you're not affected. But
    if you chose to go to whatever your number works out to, the amount
    of premium paid for the the insurance in excess of $50k is taxable, and
    is considered imputed income.  That's what they're talking about.  This
    has been in the tax code for some time, as I can remember running into
    it with my husband's insurance at his former employer where they just
    did the double-your-salary amount without giving you a choice on
    capping it at $50k to avoid the taxes.
    
    This has nothing to do with the optional life insurance that you may
    purchase in addition to the Digital-paid life insurance.

    
.2>    You read it wrong.
    
    However, considering the absolutely horrid wording of the memo, your
    misinterpretation is entirely understandable.
    

I read a comment about this IRS issue in a recent copy of Fortune Magazine. The issue 
is the tax on implied value of the term insurance. You pay tax on the cost of the 
term insurance based on the delta between the actual amount of company provided 
insurance - $50000.

Now what is interesting is that the IRS only uses one set of actuarial tables to 
calculate the effective cost of the insurance. The IRS' tables do not take into 
account your age, sex, smoker/nonsmoker, etc. So you depending on your tax bracket 
you could end up paying more in taxes than it would cost you to buy an equivalent 
amount of term insurance.

If it ends up costing you more in taxes, Fortune suggests specifying a charitable 
organization as the beneficiary (for only the amount of company paid insurance 
over $50000). If you do this you can deduct the cost of the implied term insurance.


Joe 

          <<< Note 3580.4 by ALEPPO::kb1gp.mse.tay.dec.com::Bowker >>>

I read a comment about this IRS issue in a recent copy of Fortune Magazine. 
The issue is the tax on implied value of the term insurance. You pay tax on 
the cost of the term insurance based on the delta between the actual amount of 
company provided insurance - $50000.

Now what is interesting is that the IRS only uses one set of actuarial tables 
to calculate the effective cost of the insurance. The IRS' tables do not take 
into account your age, sex, smoker/nonsmoker, etc. So you depending on your 
tax bracket you could end up paying more in taxes than it would cost you to 
buy an equivalent amount of term insurance.

If it ends up costing you more in taxes, Fortune suggests specifying a 
charitable organization as the beneficiary (for only the amount of company 
paid insurance over $50000). If you do this you can deduct the cost of the 
implied term insurance.


Joe 

    Thanks for the responses to my basenote.  I still don't clearly
    understand it, but I will defer to the wisdom of the many other Digits
    who don't see a problem with it.
    
    I also want to extend a special thanks to WLDBIL::KILGORE, from .3 for
    that wonderfully encouraging, albeit insulting response.  

re: .6

.3 may have been insulting, but he wasn't insulting you, .0, he was insulting
the people who wrote the memo you were asking about.

Please calm down

Elaine

    In case any of you are thinking about capping to avoid the extra tax,
    our wonderful HR Department advises that Open Enrollment is the only
    time you can change your insurance choice, at that ended on Nov. 18th.
    
    I have to believe they knew about this tax change and it makes me wonder why
    they didn't advise the troops while there was time to change it. I mean
    it is their job to know about these things and advise the troops, so
    why didn't they do it...?
    
    GB
    

    I believe it was spelled out in the orginal paperwork 
    when CIGNA took over the life insurance last year.
    
    I certainly wasn't surprised when I saw the infamous memo 
    last week. Although I had forgotten the details about this 
    being taxable until I read the memo, I immediately recalled 
    reading about it last year when I signed up.
    
    - Richard.

    
    
    	re .6,.7
    
    	I agree with .7.
    
    	BTW, WLDBIL, your personal name is a gas!
    
    	Stu

    
    Mr. Richardson and I have worked out our misunderstanding in a most
    amicable and gentlepersonly manner.
    
    -------
    
    I must admit that my pn is not an original work; I stole it from a
    statement by another synapse in the collective network consciousness.
    

    RE -.8
    
    	After re-reading the last Open Enrollment package, I did in fact
    fine the references to the imputed tax issue. It was in some of the 
    fine print. Guess I'll have to read a bit more carefully next time.
    
    	Turns out that the imputed tax is calculated on a base value
    caculated at a rate of around $0.29/$100, (based on an age range) and 
    that rate is established by the IRS ( sounds kinda dangerous to let them 
    set any rate by themselves...) and will be adjusted periodically. 
    
    
    Regards,
    George
    

    I checked last week's check.....$32 got added to my YTD earnings and .48 
    to my Medicare taxes (already maxed out FICA). I don't think I'll go 
    bankrupt over it. I I don't remember how much additional I opted for,
    but it was less than the 5 times my salary...maybe 3 times?
    
    Debbie