14. An employer provides group-term life insurance coverage to its employees onl

Question

14. An employer provides group-term life insurance coverage to its employees only through its cafeteria plan. The cafeteria plan allows employees to elect salary reduction for group-term life insurance. Arnold, age 42, elected salary reduction of $200 for $150,000 of group-term life insurance. None of the group-term life insurance is paid through after-tax employee contributions. How much of the group-term life insurance is includable in Arnold's income? (3pts) 15. Using the simplified method, determine the tax-free amount of the following distributions from a qualified pension plan. Contributions are made with pre-tax dollars. Please refer below table for anticipated annuity. (3pts) A. Bill, age 58, made no contribution to the pension plan and will receive a $500 monthly check for life. check of $1,300 for life. monthly payments of $1,200 over her life and the life of her 69 year-old husband. B. David, age 64, made contribution of $25,000 to the pension and will receive a monthly C. Kate, age 62, made contributions of $29,000 to the pension plan and will receive Anticipated annuity Age at annuity starting date 360 310 260 210 160 55 or under 56-60 61-65 66-70 71 or older Combined ages at annuity starting date 110 or under 410 360 310 260 111-120 121-130 131-140

Explanation / Answer

14. Amount of coverage in excess of $50000 = $100000

As per Table i , Cost per $1,000 of protection for one month period for 40-44 age bracket = 0.10

Table i cost = 0.10 * 100  (the amount of coverage in excess of $50,000 in thousands) = $10 per month

Employee contribution = 200/12 = ~ $16 per month

Arnold's contribution more than offsets the Sec. 79 cost; thus, there is not an amount to be included in taxable income of Arnold.

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