Question

Once GTL Insurance coverage becomes taxable, it is subject to:

A. FITW and FUTA only
B. SS/Medi and FUTA only
C. FITW only
D. SS/Medi only

Answer 1

Group-Term Life Insurance coverage over $50,000 becomes taxable and is subject to Social Security and Medicare taxes only, not Federal Income Tax Withholding or FUTA.

Step-by-step explanation:

Once Group-Term Life Insurance (GTL) coverage becomes taxable, it is subject to Federal Income Tax Withholding (FITW) and Social Security/Medicare (SS/Medi) taxes. It is not subject to the Federal Unemployment Tax Act (FUTA). Therefore, the correct answer to the question is 'D. SS/Medi only.' It is important to understand that the cost of employer-provided group-term life insurance coverage over $50,000 is considered a taxable fringe benefit to the employee and must be included in income, subject to Social Security and Medicare taxes. However, it is not subject to FUTA or income tax withholding.