(a) General rule
There shall be included in the gross income of an employee 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 the employee toward the purchase of such insurance.
(b) Exceptions
Subsection (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 of section 72(m)(7)),
(2) the cost of any portion of the group-term life insurance on the life of an employee provided during part or all of the taxable year of the employee under which—
(A) the employer is directly or indirectly the beneficiary, or
(B) a person described in section 170(c) is the sole beneficiary,
for the entire period during such taxable year for which the employee receives such insurance, and
(3) the cost of any group-term life insurance which is provided under a contract to which section 72(m)(3) applies.
(c) Determination of cost of insurance
For purposes of this section and section 6052, the cost of group-term insurance on the life of an employee 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 general
In the case of a discriminatory group-term life insurance plan—
(A) subsection (a)(1) shall not apply with respect to any key employee, and
(B) the cost of group-term life insurance on the life of any key 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 plan
For 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 of key 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 are key employees.
(3) Nondiscriminatory eligibility classification
(A) In general
A plan does not meet requirements of subparagraph (A) of paragraph (2) unless—
(i) such plan benefits 70 percent or more of all employees of the employer,
(ii) at least 85 percent of all employees who are participants under the plan are not key employees,
(iii) such plan benefits such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of key employees, or
(iv) in the case of a plan which is part of a cafeteria plan, the requirements of section 125 are met.
(B) Exclusion of certain employees
For purposes of subparagraph (A), there may be excluded from consideration—
(i) employees who have not completed 3 years of service;
(ii) part-time or seasonal employees;
(iii) employees not included in the plan who are included in a unit of employees covered by an agreement between employee 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 such employee representatives and such employer or employers; and
(iv) employees who are nonresident aliens and who receive no earned income (within the meaning of section 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 are key 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 the employees under the plan bears a uniform relationship to the total compensation or the basic or regular rate of compensation of such employees.
(6) Key employee defined
For purposes of this subsection, the term "key employee" has the meaning given to such term by paragraph (1) of section 416(i). Such term also includes any former employee if such employee when 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 church employees.
(B) Definitions
For purposes of subparagraph (A), the terms "church plan" and "church employee" 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 "church employee" shall not include an employee of—
(I) an organization described in section 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 former employees.
(e) Employee includes former employee
For purposes of this section, the term "employee" includes a former employee.
(f) Exception for life insurance purchased in connection with qualified transfer of excess pension assets
Subsection (b)(3) and section 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.
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 by Pub. 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 employees who 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 employee who 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 employee benefit 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 plan subsec. (a)(1) shall not apply with respect to any key employee and the cost of group-term life insurance on the life of any key employee shall 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 employee shall 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 employees described in paragraph (3)(B) who are not participants in the plan" from first sentence and inserted provision that such term also includes any retired employee if such employee when 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".
Effective Date of 2012 Amendment
Amendment by Pub. L. 112–141 applicable to transfers made after July 6, 2012, see section 40242(h) of Pub. L. 112–141, set out as a note under section 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 to employees 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 sections 105, 117, 120, 125, 127, 129, 132, 162, 401, 414, 505, 3121, 3231, 3306, 3401, 4976, and 6652 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 the Tax 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 after December 31, 1988."
Effective Date of 1986 Amendment
Pub. L. 99–514, title XI, §1151(k), Oct. 22, 1986, 100 Stat. 2508, as amended by Pub. L. 100–647, title I, §1011B(a)(25), (26), Nov. 10, 1988, 102 Stat. 3486, provided that:
"(1)
"(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 the Internal 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) [amending section 414 of this title] shall, to the extent they relate to sections 106, 162(i)(2), and 162(k) of the Internal Revenue Code of 1986, apply to years beginning after 1986.
"(2)
"(A) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after February 28, 1986), or
"(B) January 1, 1991.
A plan shall not be required to take into account employees to which the preceding sentence applies for purposes of applying section 89 of the Internal Revenue Code of 1986 (as added by this section) to employees to which the preceding sentence does not apply for any year preceding the year described in the preceding sentence.
"(3)
"(4)
"(5)
"(6)
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) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 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 by Pub. L. 99–514, §2, title XVIII, §1827(b), Oct. 22, 1986, 100 Stat. 2095, 2850, provided that:
"(1)
"(2)
"(A)
"(i) to any group-term life insurance plan of the employer in existence on January 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 before January 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 employee who retired from employment on or before January 1, 1984, and who, when he retired, was covered by the plan (or a predecessor plan).
"(B)
"(C)
"(D)
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 after December 31, 1983."
Effective Date of 1965 Amendment
Amendment by Pub. L. 89–97 applicable to taxable years beginning after Dec. 31, 1966, see section 106(e) of Pub. L. 89–97, set out as a note under section 213 of this title.
Effective Date
Pub. L. 88–272, title II, §204(d), Feb. 26, 1964, 78 Stat. 37, as amended by Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The amendments made by subsections (a) [amending this section and section 7701 of this title] and (c) [amending sections 6052 and 6678 of this title] and paragraph (3) of section 6652(a) of the Internal 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 after December 31, 1963, in taxable years ending after such date. The amendments made by subsection (b) [amending section 3401 of this title] shall apply with respect to remuneration paid after December 31, 1963, in the form of group-term life insurance provided after such date. In applying section 79(b) of the Internal Revenue Code of 1986 (as added by subsection (a)(1) of this section) to a taxable year beginning before May 1, 1964, if paragraph (2)(B) of such section applies with respect to an employee for the period beginning May 1, 1964, and ending with the close of his first taxable year ending after April 30, 1964, such paragraph (2)(B) shall be treated as applying with respect to such employee for the period beginning January 1, 1964, and ending April 30, 1964."
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by Pub. L. 101–136 to be used to implement or enforce section 1151 of Pub. L. 99–514 or the amendments made by such section, see section 528 of Pub. L. 101–136, set out as a note under section 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 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. 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 after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
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