How are employer paid premiums on a group Life Insurance plan treated for tax purposes?

• A. As an ordinary and necessary business expense
• B. Taxable to employees as wages
• C. Tax-exempt for employees
• D. Not deductible

Answer: (A)

Employer-paid premiums for a group life insurance plan are treated as an ordinary and necessary business expense for the employer. Since the employer is paying a benefit for employees, the cost is deductible in the employer’s taxes. For completeness, the employee side has a nuance: the first $50,000 of group term life coverage is excluded from the employee’s income, while any amount above that is treated as taxable income to the employee. The other options aren’t correct because the premiums aren’t fully taxable to employees, nor are they wholly exempt for employees or non deductible for the employer.