According to the Internal Revenue Service, the cost of group-term life insurance an employer provides to an employee for coverage over $50,000 is to be included in the wages reported for the employee. This amount is subject to withholding for Social Security and Medicare, but not income tax. The cost is generally determined by using the uniform premium rates provided by the IRS. These rates set the cost of each $1000 of group-term life insurance for each month, according to the employee's age.


The following steps will ensure that the proper amounts will be taxed and placed on the W2 forms.

If the NC1 pay not was not used prior to the last pay of the calendar year, the following manual procedure must be used in order for the NC1 pay to show correctly on the W2 form and to insure that the QRTRPT balances. Follow these procedures prior to generating W2 forms.

  1. Increase the QTD, and YTD gross and the QTD and YTD taxable gross figures on the federal tax record by the amount of the taxable premium.
  2. Increase the QTD, and YTD gross and the QTD and YTD taxable gross figures on the state tax deduction record to reflect the taxable premium.
  3. Increase the QTD, and YTD gross and the QTD and YTD taxable gross figures on the municipality tax deduction record IF required by the municipality. It may be necessary to contact the city tax department to determine if the premiums on life insurance over $50,000 are considered taxable or not.
  4. Increase the QTD and YTD gross and QTD and YTD taxable gross figures on the FICA and/or Medicare deduction records to reflect the taxable premium.
  5. Obtain payment from the employee for the FICA (6.2% of the taxable premium) and/or Medicare (1.45% of the taxable premium) withholding amounts. Include this amount on the QRT and YTD Deduct Total field of the FICA/Medicare Deduction record(s). The board of education must match these same amounts calculated in this step (process as a USAS transaction).
  6. Enter the taxable premium of life insurance on the federal tax deduction record in DEDSCN on the "Life Insurance Cost" line.
  7. Enter the taxable premium of life insurance on the YTD, QTD and FYTD amount fields for Non-cash earnings on JOBSCN (3 of 3). This will insure that the QRTRPT non-cash earnings will balance.