Important Insurance Changes
Employees are automatically enrolled in the FLEXTRA Program for their health benefits, including Basic Life Insurance which is one times the employee's base annual salary, with a minimum of $20,000.
These processes increase the taxable I50 income for many employees (it appears as taxable life insurance I50 income once a month on your pay stub). This income is subject to federal income tax and FICA (OASDI and Medicare).
Per IRS regulations, I50 income includes the cost of Supplemental Life insurance, if included in FLEXTRA, and Basic Life insurance over $50,000.
Because of the tax effect on employees, the City takes the following steps to reduce the tax impact for most employees:
- Supplemental Life premiums are not automatically included in the FLEXTRA Program. thus eliminating this source of taxable life insurance for employees.
- Employees with Basic Life insurance over $50,000 will have the option to cap that insurance at $50,000, to avoid I50 income.
If you have Basic Life insurance over $50,000 and you would like to calculate your monthly I50 income, follow the steps below. Also see Important Note, below.
- Take your base annual salary and round down to an even $1,000.
- Subtract $50,000.
- Divide the remainder by $1,000.
- Multiply by the rate per $1,000 (see table below). .
Cost Per $1,000 - Table from IRS Publication 15-B
||$ .05||50 through 54||$ .23|
|25 through 29||$ .06||55 through 59||$ .43|
|30 through 34||$ .08||60 through 64||$ .66|
|35 through 39||$ .09||65 through 69||$1.27|
|40 through 44||$ .10||70 and older||$2.06|
|45 through 49||$ .15|
John is 48, with a base annual salary of $61,500 (annual salary = hourly rate x scheduled work week x 52). To calculate John's I50 income, take his base annual salary and round down to the nearest thousand: $61,000. Now subtract $50,000 (to find the amount that is over $50,000). Divide that by $1,000: 11. Multiple 11 times the cost per $1,000 in the table above (11 x $0.15 = $1.65). His I50 income would be $1.65 per month. If John chooses not to cap his Basic Life insurance, at the end of the year he will have taxable life insurance income of $19.80 ($1.65 x 12 =$19.80).