Quick search by citation:

26 U.S. Code § 79 - Group-term life insurance purchased for employees

(a) General ruleThere shall be included in the gross income of anemployee for the taxable year an amount equal to the cost of group-term life insurance on his life provided for part or all of such year under a policy (or policies) carried directly or indirectly by his employer (or employers); but only to the extent that such cost exceeds the sum of—

(1)

the cost of $50,000 of such insurance, and

(2)

the amount (if any) paid by theemployee toward the purchase of such insurance.

(b) ExceptionsSubsection (a) shall not apply to—

(1)

the cost of group-term life insurance on the life of an individual which is provided under a policy carried directly or indirectly by an employer after such individual has terminated his employment with such employer and is disabled (within the meaning ofsection 72(m)(7)),

(2) the cost of any portion of the group-term life insurance on the life of anemployee provided during part or all of the taxable year of theemployee under which—

(A)

the employer is directly or indirectly the beneficiary, or

(B)

a person described insection 170(c) is the sole beneficiary,

for the entire period during such taxable year for which theemployee receives such insurance, and

(3)

the cost of any group-term life insurance which is provided under a contract to whichsection 72(m)(3) applies.

For purposes of this section and section 6052, the cost of group-term insurance on the life of anemployee provided during any period shall be determined on the basis of uniform premiums (computed on the basis of 5-year age brackets) prescribed by regulations by the Secretary.

(d) Nondiscrimination requirements

(1) In generalIn the case of adiscriminatory group-term life insurance plan—

(A)

subsection (a)(1) shall not apply with respect to anykey employee, and

(B) the cost of group-term life insurance on the life of anykey employee shall be the greater of—

(i)

such cost determined without regard to subsection (c), or

(ii)

such cost determined with regard to subsection (c).

(2) Discriminatory group-term life insurance planFor purposes of this subsection, the term “discriminatory group-term life insurance plan” means any plan of an employer for providing group-term life insurance unless—

(A)

the plan does not discriminate in favor ofkey employees as to eligibility to participate, and

(B)

the type and amount of benefits available under the plan do not discriminate in favor of participants who arekey employees.

(3) Nondiscriminatory eligibility classification

(A) In generalA plan does not meet requirements of subparagraph (A) of paragraph (2) unless—

(i)

such plan benefits 70 percent or more of allemployees of the employer,

(ii)

at least 85 percent of allemployees who are participants under the plan are notkey employees,

(iii)

such plan benefits suchemployees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor ofkey employees, or

(iv)

in the case of a plan which is part of a cafeteria plan, the requirements ofsection 125 are met.

(B) Exclusion of certain employeesFor purposes of subparagraph (A), there may be excluded from consideration—

(i)

employees who have not completed 3 years of service;

(ii)

part-time or seasonalemployees;

(iii)

employees not included in the plan who are included in a unit ofemployees covered by an agreement betweenemployee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if the benefits provided under the plan were the subject of good faith bargaining between suchemployee representatives and such employer or employers; and

(iv)

employees who are nonresident aliens and who receive no earned income(within the meaning ofsection 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

(4) Nondiscriminatory benefits

A plan does not meet the requirements of paragraph (2)(B) unless all benefits available to participants who arekey employees are available to all other participants.

(5) Special rule

A plan shall not fail to meet the requirements of paragraph (2)(B) merely because the amount of life insurance on behalf of theemployees under the plan bears a uniform relationship to the total compensation or the basic or regular rate of compensation of suchemployees.

(6) Key employee defined

For purposes of this subsection, the term “key employee” has the meaning given to such term by paragraph (1) ofsection 416(i). Such term also includes any former employeeif such employeewhen he retired or separated from service was a key employee.

(7) Exemption for church plans

(A) In general

This subsection shall not apply to a church plan maintained for churchemployees.

(B) DefinitionsFor purposes of subparagraph (A), the terms “church plan” and “churchemployee” have the meaning given such terms by paragraphs (1) and (3)(B) of section 414(e), respectively, except that—

(i)

section 414(e) shall be applied by substituting “section 501(c)(3)” for “section 501” each place it appears, and

(ii) the term “churchemployee” shall not include anemployee of—

(I)

an organization described insection 170(b)(1)(A)(ii) above the secondary school level (other than a school for religious training),

(II)

an organization described in section 170(b)(1)(A)(iii), and

(III)

an organization described in section 501(c)(3), the basis of the exemption for which is substantially similar to the basis for exemption of an organization described in subclause (II).

(8) Treatment of former employees

To the extent provided in regulations, this subsection shall be applied separately with respect to formeremployees.

(e) Employee includes former employee

For purposes of this section, the term “employee” includes a formeremployee.

(f) Exception for life insurance purchased in connection with qualified transfer of excess pension assets

Subsection (b)(3) andsection 72(m)(3) shall not apply in the case of any cost paid (whether directly or indirectly) with assets held in an applicable life insurance account (as defined in section 420(e)(4)) under a defined benefit plan.

(AddedPub. L. 88–272, title II, § 204(a)(1),Feb. 26, 1964,78 Stat. 36; amendedPub. L. 89–97, title I, § 106(d)(3),July 30, 1965,79 Stat. 337;Pub. L. 94–455, title XIX, § 1906(b)(13)(A),Oct. 4, 1976,90 Stat. 1834;Pub. L. 97–248, title II, § 244(a),Sept. 3, 1982,96 Stat. 523;Pub. L. 98–369, div. A, title II, § 223(a), (b),July 18, 1984,98 Stat. 775;Pub. L. 99–514, title XI, § 1151(c)(1), title XVIII, § 1827(a)(1), (c), (d),Oct. 22, 1986,100 Stat. 2503, 2850, 2851;Pub. L. 100–647, title V, § 5013(a),Nov. 10, 1988,102 Stat. 3666;Pub. L. 101–140, title II, § 203(a)(1), (b)(1)(A),Nov. 8, 1989,103 Stat. 830, 831;Pub. L. 101–508, title XI, § 11703(e)(1),Nov. 5, 1990,104 Stat. 1388–517;Pub. L. 112–141, div. D, title II, § 40242(d),July 6, 2012,126 Stat. 861.)

Editorial Notes

Amendments

2012—Subsec. (f).Pub. L. 112–141 added subsec. (f).

1990—Subsec. (d)(6).Pub. L. 101–508 substituted “any former employee” for “any retired employee”.

1989—Subsec. (d).Pub. L. 101–140, § 203(a)(1), amended subsec. (d) to read as if amendments byPub. L. 99–514, § 1151(c)(1), had not been enacted, see 1986 Amendment note below.

Subsec. (d)(7).Pub. L. 101–140, § 203(b)(1)(A), amended par. (7) generally. Prior to amendment, par. (7) read as follows: “All employeeswho are treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.”

1988—Subsec. (c).Pub. L. 100–647 struck out at end “In the case of an employeewho has attained age 64, the cost prescribed shall not exceed the cost with respect to such individual if he were age 63.”

1986—Subsec. (d).Pub. L. 99–514, § 1151(c)(1), amended subsec. (d) generally, substituting “In the case of a group-term life insurance plan which is a discriminatory employeebenefit plan, subsection (a)(1) shall apply only to the extent provided in section 89.” for provisions formerly designated as pars. (1)(A) and (B) that in the case of a discriminatory group-term life insurance plansubsec. (a)(1) shall not apply with respect to any key employeeand the cost of group-term life insurance on the life of any key employeeshall be determined without regard to subsec. (c), and striking out pars. (2) to (7) relating to classifications and eligibility classifications of nondiscriminatory plans.

Subsec. (d)(1)(B).Pub. L. 99–514, § 1827(a)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “the cost of group-term life insurance on the life of any key employeeshall be determined without regard to subsection (c).”

Subsec. (d)(6).Pub. L. 99–514, § 1827(c), struck out “, except that subparagraph (A)(iv) of such paragraph shall be applied by not taking into account employeesdescribed in paragraph (3)(B) who are not participants in the plan” from first sentence and inserted provision that such term also includes any retired employeeif such employeewhen he retired or separated from service was a key employee.

Subsec. (d)(8).Pub. L. 99–514, § 1827(d), added par. (8).

1984—Subsec. (b)(1).Pub. L. 98–369, § 223(a)(2), struck out “either has reached the retirement age with respect to such employer or” before “is disabled”.

Subsec. (d)(1).Pub. L. 98–369, § 223(b), designated existing provisions as subpar. (A) and added subpar. (B).

Subsec. (e).Pub. L. 98–369, § 223(a)(1), added subsec. (e).

1982—Subsec. (d).Pub. L. 97–248 added subsec. (d).

1976—Subsec. (c).Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

1965—Subsec. (b)(1).Pub. L. 89–97 substituted “section 72(m)(7)” for “paragraph (3) of section 213(g), determined without regard to paragraph (4) thereof”.

Statutory Notes and Related Subsidiaries

Effective Date of 2012 Amendment

Amendment byPub. L. 112–141 applicable to transfers made afterJuly 6, 2012, seesection 40242(h) of Pub. L. 112–141, set out as a note undersection 420 of this title.

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11703(e)(2),Nov. 5, 1990,104 Stat. 1388–517, provided that:

“The amendment made by paragraph (1) [amending this section] shall apply toemployees separating from service after the date of the enactment of this Act [Nov. 5, 1990].”

Effective Date of 1989 Amendment

Pub. L. 101–140, title II, § 203(c),Nov. 8, 1989,103 Stat. 832, provided that:

“The amendments made by this section [amending this section and sections105,117,120,125,127,129,132,162,401,414,505,3121,3231,3306,3401,4976, and6652 of this title,section 409 of title 42, The Public Health and Welfare, and provisions set out as notes under sections 89 and 3121 of this title] shall take effect as if included in section 1151 of theTax Reform Act of 1986 [Pub. L. 99–514, see section 1151(k) set out below].”

Effective Date of 1988 Amendment

Pub. L. 100–647, title V, § 5013(b),Nov. 10, 1988,102 Stat. 3666, provided that:

“The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning afterDecember 31, 1988.”

Effective Date of 1986 Amendment

Pub. L. 99–514, title XI, § 1151(k),Oct. 22, 1986,100 Stat. 2508, as amended byPub. L. 100–647, title I, § 1011B(a)(25), (26),Nov. 10, 1988,102 Stat. 3486, provided that:

“(1) In general.—The amendments made by this section [enactingsection 89 of this title and amending this section and sections 105, 106, 117, 120, 125, 127, 129, 132, 414, 505, 6039D, and 6652 of this title] shall apply to years beginning after the later of—

“(A)

December 31, 1987, or

“(B) the earlier of—

“(i)

the date which is 3 months after the date on which the Secretary of the Treasury or his delegate issues such regulations as are necessary to carry out the provisions of section 89 of theInternal Revenue Code of 1986 (as added by this section), or

“(ii)

December 31, 1988.

Notwithstanding the preceding sentence, the amendments made by subsections (e)(1) and (i)(3)(C) [amendingsection 414 of this title] shall, to the extent they relate to sections 106, 162(i)(2), and 162(k) of theInternal Revenue Code of 1986, apply to years beginning after 1986.

“(2) Special rule for collective bargaining plan.—In the case of a plan maintained pursuant to 1 or more collective bargaining agreements betweenemployee representatives and 1 or more employers ratified beforeMarch 1, 1986, the amendments made by this section [enactingsection 89 of this title and amending this section and sections 105, 106, 117, 120, 125, 127, 129, 132, 414, 505, 6039D, and 6652 of this title] shall not apply to employeescovered by such an agreement in years beginning before the earlier of—

“(A)

the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof afterFebruary 28, 1986), or

“(B)

January 1, 1991.

A plan shall not be required to take into accountemployees to which the preceding sentence applies for purposes of applying section 89 of theInternal Revenue Code of 1986 (as added by this section) to employeesto which the preceding sentence does not apply for any year preceding the year described in the preceding sentence.

“(3) Exception for certain group-term insurance plans.—

In the case of a plan described in section 223(d)(2) of theTax Reform Act of 1984 [section 232(d)(2) of Pub. L. 98–369, set out as an Effective Date of 1984 Amendment note below], such plan shall be treated as meeting the requirements of section 89 of theInternal Revenue Code of 1986 (as added by this section) with respect to individuals described in section 223(d)(2) of such Act. An employer may elect to disregard such individuals in applying section 89 of such Code (as so added) to other employeesof the employer.

“(4) Special rule for church plans.—

In the case of a church plan (within the meaning of section 414(e)(3) of theInternal Revenue Code of 1986) maintaining an insured accident and health plan, the amendments made by this section [enactingsection 89 of this title and amending this section and sections 105, 106, 117, 120, 125, 127, 129, 132, 414, 505, 6039D, and 6652 of this title] shall apply to years beginning afterDecember 31, 1988.

“(5) Cafeteria plans.—

The amendments made by subsection (d)(2) [amending sections3121 and3306 of this title andsection 409 of Title 42, The Public Health and Welfare] shall apply to taxable years beginning afterDecember 31, 1983.

“(6) Certain plans maintained by educational institutions.—

If an educational organization described in section 170(b)(1)(A)(ii) of theInternal Revenue Code of 1986 makes an election under this paragraph with respect to a plan described in section 125(c)(2)(C) of such Code, the amendments made by this section shall apply with respect to such plan for plan years beginning after the date of the enactment of this Act [Oct. 22, 1986].”

Pub. L. 99–514, title XVIII, § 1827(a)(2),Oct. 22, 1986,100 Stat. 2850, provided that:

“The amendment made by paragraph (1) [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Oct. 22, 1986].”

Amendment by section 1827(c), (d) ofPub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of theTax Reform Act of 1984,Pub. L. 98–369, div. A, to which such amendment relates, seesection 1881 of Pub. L. 99–514, set out as a note undersection 48 of this title.

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title II, § 223(d),July 18, 1984,98 Stat. 775, as amended byPub. L. 99–514, § 2, title XVIII, § 1827(b),Oct. 22, 1986,100 Stat. 2095, 2850, provided that:

“(1) In general.—

Except as provided in paragraph (2), the amendments made by this section [amending this section andsection 83 of this title] shall apply to taxable years beginning afterDecember 31, 1983.

“(2) Inclusion of former employees in the case of existing group-term insurance plans.—

“(A) In general.—The amendments made by subsection (a) [amending this section] shall not apply—

“(i)

to any group-term life insurance plan of the employer in existence onJanuary 1, 1984, or

“(ii)

to any group-term life insurance plan of the employer (or a successor employer) which is a comparable successor to a plan described in clause (i),

but only with respect to an individual who attained age 55 on or beforeJanuary 1, 1984, and was employed by such employer (or a predecessor employer) at any time during 1983. Such amendments also shall not apply to any employeewho retired from employment on or beforeJanuary 1, 1984, and who, when he retired, was covered by the plan (or a predecessor plan).

“(B) Special rule in the case of discriminatory group-term life insurance plan.—

In the case of any plan which, afterDecember 31, 1986, is a discriminatory group-term life insurance plan(as defined in section 79(d) of theInternal Revenue Code of 1986 [formerly I.R.C. 1954]), subparagraph (A) shall not apply in the case of any individual retiring under such plan afterDecember 31, 1986.

“(C) Benefits to certain retired individuals not taken into account for purposes of determining whether plan is discriminatory.—

For purposes of determining whether a plan described in subparagraph (A) meets the requirements of section 79(d) of theInternal Revenue Code of 1986 with respect to group-term life insurance for former employees, coverage provided to employeeswho retired on or beforeDecember 31, 1986, may, at the employer’s election, be disregarded.

“(D) Comparable successor plans.—

For purposes of subparagraph (A), a plan shall not fail to be treated as a comparable successor to a plan described in subparagraph (A)(i) with respect to anyemployee whose benefits do not increase under the successor plan.”

Effective Date of 1982 Amendment

Pub. L. 97–248, title II, § 244(b),Sept. 3, 1982,96 Stat. 524, provided that:

“The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning afterDecember 31, 1983.”

Effective Date of 1965 Amendment

Amendment byPub. L. 89–97 applicable to taxable years beginning afterDec. 31, 1966, seesection 106(e) of Pub. L. 89–97, set out as a note undersection 213 of this title.

Effective Date

Pub. L. 88–272, title II, § 204(d),Feb. 26, 1964,78 Stat. 37, as amended byPub. L. 99–514, § 2,Oct. 22, 1986,100 Stat. 2095, provided that:

“The amendments made by subsections (a) [amending this section andsection 7701 of this title] and (c) [amending sections 6052 and 6678 of this title] and paragraph (3) of section 6652(a) of theInternal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by section 221(b)(2) of this Act), shall apply with respect to group-term life insurance provided afterDecember 31, 1963, in taxable years ending after such date. The amendments made by subsection (b) [amendingsection 3401 of this title] shall apply with respect to remuneration paid afterDecember 31, 1963, in the form of group-term life insurance provided after such date. In applying section 79(b) of theInternal Revenue Code of 1986 (as added by subsection (a)(1) of this section) to a taxable year beginning beforeMay 1, 1964, if paragraph (2)(B) of such section applies with respect to an employeefor the period beginningMay 1, 1964, and ending with the close of his first taxable year ending afterApril 30, 1964, such paragraph (2)(B) shall be treated as applying with respect to such employeefor the period beginningJanuary 1, 1964, and endingApril 30, 1964.”

Nonenforcement of Amendment Made bySection 1151 of Pub. L. 99–514 for Fiscal Year 1990

No monies appropriated byPub. L. 101–136 to be used to implement or enforcesection 1151 of Pub. L. 99–514 or the amendments made by such section, seesection 528 of Pub. L. 101–136, set out as a note undersection 89 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and1171–1177] or title XVIII [§§ 1800–1899A] ofPub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or afterJan. 1, 1989, seesection 1140 of Pub. L. 99–514, as amended, set out as a note undersection 401 of this title.

U.S. Code Toolbox

Law about... Articles from Wex

Table of Popular Names

Parallel Table of Authorities

How current is this?

Movatterモバイル変換

26 U.S. Code § 79 - Group-term life insurance purchased for employees

U.S. Code Toolbox