If an employer offers group life insurance for $10,000, what is true regarding this coverage?

The coverage provided by group life insurance typically follows specific tax guidelines. In this case, the statement that the cost over $50,000 is taxable to the employee is accurate because, under IRS regulations, employer-provided group life insurance coverage up to $50,000 is generally not subject to taxation as a fringe benefit. However, if an employee has coverage exceeding $50,000, the value of the excess coverage is subject to income tax.

This tax liability arises because the employer's contribution to the life insurance premium over that limit is considered a taxable fringe benefit. Thus, employees must report the cost of coverage that exceeds $50,000 as imputed income, which is ultimately taxed as ordinary income. Understanding this aspect of group life insurance can help employees manage their financial expectations regarding employer-sponsored benefits.

The other statements pertain to different aspects of life insurance and may not fully reflect the implications of group life coverage. The overall tax treatment of group insurance can be nuanced, which is why recognizing the specific tax rules concerning coverage limits is crucial for employees participating in such plans.