Toast Payroll: Record Group Term Life Benefits

In this Article:

• Group Term Life Benefit Basics
• Calculate and Add GTL Insurance as an Earning
  • New Earning Code
  • Mass Import
  • Recording for Employees

Group Term Life Benefit Basics 

A Group Term Life (GTL) benefit is an employer paid benefit paid out in the event an employee dies while covered.  
 

There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be included in income using the IRS Premium Table and it is subject to social security and Medicare taxes. Coverage exceeding $50,000 is converted to taxable imputed income. For example, if an employee elects $75,000 of coverage, they are only taxed on $25,000 of the coverage. The inputted income is considered a non-cash, taxable earning and must be recorded and taxed on a payroll with cash earnings. Source: IRS
 

Note: Group term life (GTL) insurance premiums are an item that you may need to add to payroll as wages to appear on Form W-2s. Taxable fringe benefits and S-Corp owner health premiums are some others. Consult with an CPA or other professional to make sure you are recording all you need to. GTL benefits must be recorded in Toast Payroll by the last payroll of the year.

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Calculate and Add GTL Insurance as an Earning

To calculate per employee, download a copy of this spreadsheet. You will need the following information:
 

Taxes are calculated based on the employee's age. Age factors into the monthly taxable gross and coverage timeframes.

Once calculated, add the value from the Annual Taxable Gross column to payroll as a taxable, non-cash earning using the Employee Earnings step of running payroll. Check out the One-Time Earnings section of Toast Payroll: Add or Edit Earnings & Deductions to learn more on adding an earning to your payroll.

This means you are recording the taxes but are not paying out the value (net). These must be recorded on a payroll with cash earnings. This is because a non-cash earning increases the employee’s gross wages and taxable wages, but since there is nothing actually being paid out, just a value being recorded, the employee’s net pay does not increase and tax withholding will need to be pulled from the cash earnings. 
 

New Earning Code

If you need a GTL earning code created, fill out this earning code request form. Then select the blue chat dot in the lower-right corner of any Toast Payroll page to send this to Customer Care so we can implement it. If you decide that this earning code should be tied to Form W-2 box 12c, specify that on the form.
 

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Mass Import

If there are multiple employees to record, the income amount from the spreadsheet calculator above can be added via Custom Import using a CSV template. Contact us via the blue chat dot in the lower-right corner of any Toast Payroll page to have an import template set up. This allows you to import multiple GTL benefit earnings during the Employee Earnings step under Advanced Actions > +Add Custom Import.

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Recording For Employees

In order to calculate taxes, GTL benefits must be recorded via Quick Calcs for either terminated employees or employees who do not have cash earnings on payroll. There are two ways to record the earnings:

• The employer is covering the taxes on the benefit
• The employee is subject to taxes on the benefit

As the employer, if you choose to cover the taxes, you will add an earning for the terminated employee and adjust the "Federal Income Tax (FIT)" and "State Income Tax (SIT)" withholding to zero. The following steps can be used to compete this task:

1. Add the earning amount using a quick calc. Toast Payroll: Issue Manual Checks (Quick Calcs) has the instructions to do so.
2. Once you've selected Calculate Gross to Net, adjust FIT and SIT withholdings to zero in the pop-up window. Select Save before selecting Close on this screen.
   
   
    
3. Follow the instructions in the article, all the way through the Attach a Quick Calc to Payroll section.
4. Once payroll has been submitted, you will see something similar to the following entry on the Employee Detail report: 
   
   
   
   
5. If the terminated employee is subject to taxes for the earning, add the earning to a payroll on the Employee Earnings step. Social Security (FICA) taxes, FIT withholding, and SIT withholding will all go into arrears.  

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This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.