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The Diocese of New York has a contract with the Church Life Insurance Corporation for life insurance for eligible lay and clergy employees. As with all types of insurance through the diocesan group, eligible employees are those working at least 20 hours per week. The group term life insurance costs $7.08 per $1,000 of coverage per year.
Employers may provide up to $50,000 of group term life insurance as a non-taxable fringe benefit. There is a taxable value for the employee if the employer provides more than $50,000. See Value of life insurance over $50,000 [below] The taxable value is not related to the premium cost.
The Lay Compensation Guidelines mandate that congregations provide their eligible employees with group term life insurance in the amount of twice annual salary (rounded always up to the next higher $1,000) to a maximum of $50,000.
Thus a parish secretary who works 25 hours per week and earns $19,600 annually would have $40,000 of group term life insurance coverage ($19,600 x 2 = $39,200, rounded up to the nearest thousand = $40,000). Any lay employee who earns more than $24,500 would have the maximum of $50,000.
All clergy for whom pension assessments are being paid have a group term life insurance benefit paid for by the Pension Fund in the amount of twice their pension base to a maximum of $50,000. Most parish clergy, therefore, already have $50,000 of group term life insurance coverage.
Group Life Insurance Premium Rates 2013
There will be no change to the Group Life Insurance and AD&D premium rates for 2013
The diocesan contract allows each congregation to add additional life insurance coverage for their clergy staff. The coverage can be either a flat amount or twice compensation as reported to the Pension Fund, rounded to the next higher $1,000, to a maximum of $100,000.
The clergy staff of each congregation must be covered according to the same criterion. A congregation may not cover the Rector for twice compensation while covering the Curate for $10,000. However, in a congregation that covers its clergy staff at twice compensation to the maximum of $100,000, if the Rector's pension base is $65,000 and the half-time Curate's pension base compensation is $25,000, the Rector would have $100,000 of coverage, and the Curate would have $50,000.
Group term life insurance over $50,000 is taxable
The value of group term life insurance provided by one or more employers is considered taxable income in the current year to the extent the insurance coverage exceeds $50,000. The Church Pension Fund provides group life insurance coverage for all clergy active in the Fund, subject to some limitations and eligibility. The coverage is based on two
times their Total Compensation (as reported to the Church Pension Fund) to a maximum of $50,000, rounded to the nearest $500). Active lay employees under the age of 72 participating in the Episcopal Church Lay Employees’ Defined Benefit Retirement Plan are provided with coverage up to $50,000 (two
times salary with a maximum of $50,000, rounded to the nearest $500). Clergy and lay whose diocese, church, or other employer provides additional life insurance will have an income tax liability each year. Contrary to popular belief, this tax liability is not based on the actual cost of the life insurance. The IRS provides a table that must be used to determine the value of this benefit.
Cost Per $1,000 of All Group Life Insurance Coverage
Per Month Exceeding the $50,000 Exclusion
Age _ Monthly Cost
Under 25 $.05
25 to 29 .06
30 to 34 .08
35 to 39 .09
40 to 44 .10
45 to 49 .15
50 to 54 .23
55 to 59 .43
60 to 64 .66
65 to 69 1.27
Over 70 2.06
Each employer (diocese, parish, institution, or other employer) should provide a W-2 hat includes the annual value of this insurance benefit. But even if a W-2 with this information is not received, it is the individual's responsibility to report this imputed income when filing income tax returns.