PS 58 costs are the premiums paid by an employer for group term life insurance coverage for an employee under a qualified retirement plan. These costs are included in the employee’s gross income for the taxable year in which the plan pays the premium.
Reporting PS 58 Costs
The plan administrator is responsible for reporting PS 58 costs to the employee on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. This form is issued annually, even if there has been no physical distribution from the plan.
Box 7 of Form 1099-R
PS 58 costs are reported in Box 7 of Form 1099-R. The code for PS 58 costs is “9.”
Tax Treatment of PS 58 Costs
PS 58 costs are included in the employee’s gross income for the taxable year in which the plan pays the premium. This means that the employee must pay income tax on the PS 58 costs.
Basis in the Plan
Although PS 58 costs are included in the employee’s gross income, they also create a basis in the plan. This means that the employee will not be taxed again on the cumulative PS 58 costs when the insurance contract is distributed to them or when the life insurance proceeds are distributed to their beneficiaries.
PS 58 costs are reported to the employee on Form 1099-R, Box 7, with code “9.” These costs are included in the employee’s gross income for the taxable year in which the plan pays the premium. However, PS 58 costs also create a basis in the plan, which means that the employee will not be taxed again on these costs when they receive a distribution from the plan.
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FAQ
How is ps58 cost calculated?
Are employer paid life insurance premiums taxable income?
Are life insurance proceeds reported on 1099-R?
How to calculate imputed income for group term life insurance?
What is a PS 58 cost?
Because of this, most or all of the participants in the plan must have insurance policies. The life insurance protection portion of the premium must be taken as a taxable benefit annually by the insured plan participant. This is called a P.S. 58 cost.
What is a PS 58 deductible life insurance plan?
If the plan uses deductible employer contributions to purchase life insurance for a participant, then the cost of the protection (PS 58 cost) is reported on Form 1099-R. The participant must include the amount in taxable income for the year the premium is paid.
When is a PS 58 cost reportable?
P.S. 58 cost (or yearly renewable term cost if lower) is reportable if dividends are used to buy paid up additions and the employer is entitled to the cash surrender value and the employee’s beneficiary collects the balance of any death benefit.
Are PS 58 costs taxable?
We would like to remind you that by January 31, 2020, you will receive IRS Form 1099R which shows your 2019 PS58 cost. The income shown on this 1099R must be reported on your 2019 personal federal income tax return.