8793 / Are benefits paid under an employer-sponsored plan by reason of the employee’s death received tax-free?

Accidental death benefits under an employer’s plan are received income tax-free by an employee’s beneficiary under IRC Section 101(a) as life insurance proceeds payable by reason of the insured’s death.¹ Death benefits payable under life insurance contracts issued after December 31, 1984, are excludable if the contract meets the statutory definition of a life insurance contract in IRC Section 7702. See Q 8763 to Q 8785 for a detailed discussion of the tax treatment of life insurance death proceeds.

Survivors’ Benefits

Benefits paid to a surviving spouse and dependents under an employer accident and health plan that provided coverage for an employee and the employee’s spouse and dependents both before and after retirement, and to the employee’s surviving spouse and dependents after the employee’s death, are excludable to the extent that they would be if paid to the employee.²

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1.  Treas. Reg. § 1.101-1(a).