251 / Is the cost of employer-provided group term life insurance subject to Social Security tax?

Yes. The cost of group term life insurance that is includable in the gross income of the employee is considered wages subject to Social Security tax.¹

The general rule is that an employee may exclude the cost of the first $50,000 of employer-provided group term life insurance from income ( Q 246). Therefore, only the cost of coverage in excess of $50,000 generally will be subject to the Social Security tax.

An employer is required to report amounts includable in the wages of current employees for purposes of the Social Security tax on employees’ W-2 forms. An employer generally may treat wages as though paid on any basis so long as they are treated as paid at least once each year.²

Social Security tax must be paid by an employee if a payment for group term life insurance is considered wages and is for periods during which there is no longer an employment relationship between the employer and the employee. An employer is required to separately state the portion of an employee’s wages that consist of payments for group term life insurance and the amount of Social Security tax.³