Imputed income is the taxable value of a non-cash benefit an employee receives from their employer. While an employee does not receive this value directly in their pay, the IRS considers it part of their compensation and is taxable. Some situations include, but are not limited to:

• Education assistance and/or tuition reimbursement exceeding $5,250.
• Voluntary Term Life plans paid by the employee on a pre-tax basis.
• Employer-sponsored Group Term Life insurance coverage exceeding $50,000.

For example, if the cost exceeds $50,000 for employer-sponsored Group Term Life insurance, it is considered part of employee compensation and is taxable. The amount of imputed income is based on the value of the life benefit and the age of the employee. Employees paying for group term life insurance with post-tax dollars may reduce the total amount of imputed income by the post-tax contributions.

Enabling Imputed Income Benefits

For the system to calculate imputed income, the option must be enabled for any benefits subject to the calculations as described in this article. This configuration should be made based upon the specific nature of the benefit plan(s) being offered (to determine which plans qualify). If you are unfamiliar with enabling this option, you can expand the section below for steps.

Populating Imputed Income Log

1. Expand Settings and click Benefit Management from the menu.

   

2. Click Advanced Settings from the menu bar near the top of the page.

   

3. Click the Imputed Income tab.

   

4. Select the benefit package from the dropdown menu.

   

5. Populate the Imputed Income Log, such as the example below. Please refer to the IRS Published Rates for specific age and rate for more information. Click Save when finished.

   

6. Once the IRS Rates have been entered, the Effective Date should be set to the Date for which you wish to base the calculation (i.e., the date of benefit coverage).

   

7. Click Populate to execute the calculation of Imputed Income.

Imputed Income Calculation

The Imputed Income Calculation is based on benefits configured for the Imputed Income Calculation. According to IRS Rules, age should be determined as of 12/31 of the plan year. The Imputed Income Calculation will add one year to the “Birth Date Effective Date” field configured against the Package that corresponds to the "Effective Date" entered on the "Imputed Income" tab to incorporate this offset.

Imputed Income Example Scenario

• Employee Basic Coverage = $40,000
• Employee Supplemental Life Coverage = $80,000
• Employee Age as of 12/31/2012 = 41
• Annualized Before-Tax Employee Contribution for Employee Supplemental Life = $67.20

Imputed Income Calculation

1. Total Coverage of Imputed Income Benefits less $50,000 = Excess Coverage
2. Determine Rate and Divisor of Employee based on Age (from Rate Table)
3. Excess Coverage / Divisor * Imputed Income Annual Cost = Gross Imputed Income
4. Gross Imputed Income less After-Tax Employee Contribution for Imputed Income Benefits = Annual Net Imputed Income

Imputed Income Calculation based on Example Scenario

1. ($40,000 + $80,000) - $50,000 = $70,000
2. $1.20 for Age 41 / $1000 Divisor
3. $70,000 / $1000 * $1.20 = $84
4. $84 - $67.20 = $16.80

Imputed Income Log

Once the “Populate Change Log” process is executed, a "Pending Record" will be created within the Imputed Income Log. This record will indicate how many employees were eligible for Imputed Income. By clicking the “View Employees” link on the Pending Record, it is possible to view each individual employee along with the calculated Annual Net Imputed Income Amount.

Exporting Imputed Income

To export the Imputed Income data, create an Export from the Data Exports screen and select “Imputed Income” as the Data Type. This will inform the system to pull all “Pending” records from the Imputed Income Log into the export. Then configure the export according to the specifications required by the receiving system.