The amount of your Group Basic Life Insurance may have increased in 2026. That increase may affect your taxes.

Background on the Tax and How to Decline the Benefit Increase

Because your employer pays for this benefit, any amount over 50,000 is taxable and will increase your taxes. Here’s what that means—and what you can do to avoid extra tax.

Why your life insurance may affect your taxes

The IRS calls employer-paid life insurance a taxable fringe benefit. That means:

• The first $50,000 is not taxed
• The value above $50,000 is added to your pay for tax purposes

Decline the additional coverage; avoid the added tax

You may decline coverage above $50,000 to avoid additional taxes. Take these steps to decline the added coverage:

• Fill out the Request to Waive Taxable Life Insurance Benefit form.
• Send the form to SEGIP.

If you later want coverage above $50,000:

• Approval is not automatic.
• Submit the Reinstate Taxable Life Insurance form to SEGIP.
• The life insurance company may contact you directly to provide proof that you are in good health.
• If approved, you will pay tax on imputed income for the value of coverage above $50,000.

Learn More About Imputed Income

The IRS sets a monthly cost based on your age. Costs go up as you get older. The examples below use sample IRS rates to show how the math works.

Example 1: Annual Salary: $40,000, age 55

• Life insurance amount: $50,000
• Amount over $50,000: $0
• Imputed income: $0
• Tax impact: none

Example 2: Annual Salary: $41,000, age 55

• Life insurance amount: $60,000
• Amount over $50,000: $10,000
• IRS sample cost: about $0.43 per $1,000 per month
• Imputed income: about $4.30 per month or $52 per year

Example 3: Annual Salary $55,000, age 42

• Life insurance amount: $70,000
• Amount over $50,000: $20,000
• IRS sample cost: about $0.15 per $1,000 per month
• Imputed income: about $3 per month or $36 per year

Your amount may be higher or lower. It depends on your age and how much coverage you have. IRS rules add this imputed income to your wages. This may slightly increase your federal, state, and FICA taxes.

Find the amount of Your Benefit

Your amount of your benefit is based on your annual salary. Check your labor contract or pay plan for details. Go to the Employee Life Coverage section and find your annual base salary in the table. The benefit you receive is listed under the Group Life Insurance Coverage column. If the amount listed is more than $50,000, your paycheck tells you how much you pay in taxes for the benefit.

• Review the Employer Paid Benefits section
• Look for the Basic Life* line
• If your coverage is over $50,000, you will see a taxable amount listed.

Questions? SEGIP is Here to Help

Contact your colleagues in SEGIP Member Services at 651-355-0100 or segip.mmb@state.mn.us if you have questions.