Imputed Income Reporting Lorena Dema Business Analyst, Benefits - PowerPoint PPT Presentation

Education for Benefits Administrators: Imputed Income Reporting Lorena Dema Business Analyst, Benefits Policy November 18, 2020 CPG Administrator Webinar Series

Today’s Agenda Definition of Imputed Income: What, Why, Who, When and How Imputed Income Reports: Detailed look at the contents Important Timeframes and Deadlines Method of Delivery: Diocesan Administrators Website & MLPS Questions and Discussion 2

What is Imputed Income? Imputed income is the value of non-cash compensation that W2 is taxable to the employee. Because it is a benefit provided in return for the performance of services, it must be included in the employee’s Form W-2 The amount of imputed income relating to employer- provided group-term life insurance is governed by Internal Revenue Code Section 79 For additional information on imputed income on group-term life insurance refer to: http://www.irs.gov/pub/irs-pdf/p15b.pdf. 3

Imputed Income on Group-term Life Insurance Section 79 of the Internal Revenue Code (IRC) requires employers to calculate taxable imputed income for employees that receive group-term life insurance coverage in excess of $50,000. Essentially means: The first $50,000 of group-term life insurance coverage provided is excluded from compensation Group-term life insurance provided by one or more employers in excess of $50,000 requires the calculation of taxable imputed income in the current year The amount of taxable imputed income must be reported on any active/ terminated employee’s Form W -2 each year 4

Church Life Provides Three Forms of Group-term Life Insurance: Group-term Life Insurance from CPF Clergy Pension Plan 1 • All eligible active clergy can receive life insurance coverage up to $150,000* • All eligible retired clergy can receive life insurance coverage up to $50,000** Employer Provided Group-term Life Insurance 2 • Each group can choose to purchase additional group-term life coverage, and the coverage amounts can differ by group Lay Death Benefit Plan • Active lay participants in the Lay DB Plan are eligible for a death benefit equal to the lesser 3 of two times the participant’s earnings or $50,000 • This benefit is paid from a self-funded life insurance plan that is treated as group-term life insurance under IRC section 7702(j) and is therefore considered in the calculation of imputed income **Based on 6x total assessable compensation as reported to the The Church Pension Fund. 5 **Based on 6x total Highest Average Compensation as reported to The Church Pension Fund.

What is Excluded in the Imputed Income Reports? Any additions, changes to an employer (listbill) or terminations made after Monday, November 2nd, 2020, for the December 2020 invoice Additional group-term life insurance benefits offered outside of those offered by CPF and Church Life: • Only information we have at CPF/Church Life is calculated • Imputed income from non-Church Life Group-term life insurance must be independently calculated and then added to the imputed income provided by CPG and reported on Form W-2 6

How is Imputed Income Calculated? We do the work for you… …the imputed income amount is calculated based upon: Total amount Employee age Monthly cost per $1,000 of group-term of all group-term life life insurance insurance in excess of in excess of $50,000, provided by the IRC Section 79 – $50,000 Rate Chart Let’s try one together…with Father Income, age 46… 7

IRS Premium Table Rates IRC Section 79: Imputed Income Using this chart, on Group-term Life Insurance we determine the Age Monthly Cost monthly cost of Under 25 $ .05 $1,000 of 25 to 29 .06 30 to 34 .08 coverage for a 35 to 39 .09 46-year-old: 40 to 44 .10 45 to 49 .15 50 to 54 .23 55 to 59 .43 60 to 64 .66 65 to 69 1.27 70 and Older 2.06 This table is based on IRS Publication 15-B, December 18, 2018. We always recommend that you consult with your tax advisor. 8

Imputed Income Calculation Total Coverage Not Taxable Taxable Coverage – = $150,000 $50,000 $100,000 The imputed income associated with the $100,000 of taxable group-term life insurance would be calculated as follows: Obtain the monthly cost of $1,000 of 1 coverage for a 46-year-old from the chart = .15 Multiply the monthly cost x 12 to obtain 2 the annual cost* .15 x 12 = $1.80 Multiply the annual cost by each $1,000 3 of excess group-term life insurance 100 x $1.80 = $180.00 Imputed Income Total *If the insurance coverage was provided for less than a year, multiply the monthly cost by the number of months the coverage was provided to the individual. 9

Group-term Life Insurance under the Clergy Pension Plan Coverage increased to a maximum of $150,000 effective 01/01/2018. In 2018 this results in high fluctuations of the imputed Income amounts. Rev. Income 2018 Imputed Income Calculations Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Group Life through pension ( increased as of 01/01/2018) 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Group Life diocesean coverage 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Total group Coverage 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 First 50K excluded from calculation 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Taxable group life amount 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Rate per $1,000 for your age band ( monthly) 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 Imputed Income by month 190.50 190.50 190.50 190.50 190.50 190.50 190.50 190.50 190.50 190.50 190.50 190.50 $ 2,286.00 Rev. Income 2017 Imputed Income Calculations Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Group Life through pension 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Group Life diocesean coverage 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Total group Coverage 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 First 50K excluded from calculation 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Taxable group life amount 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Rate per $1,000 for your age band ( monthly) 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 1.27 Imputed Income by month 127.00 127.00 127.00 127.00 127.00 127.00 127.00 127.00 127.00 127.00 127.00 127.00 $ 1,524.00 10

W-2 Form Imputed Income Reporting C Imputed Income is reported on W-2 form in Box 1, Box 12 with a code C and is not eligible for the clergy housing allowance . In addition for lay employees, this amount must be included in Boxes 3 and 5 and is subject to FICA tax as well. 11

Imputed Income Reports (cont’d) 12

Imputed Income Reports (cont’d) Supply imputed income amount to the parishes in your diocese Parishes can include this amount on employee’ s Form W-2 Data based on employee coverage through December 31 Data compiled in November allows reports to be ready by December Changes made after December invoice must be adjusted using the IRC Section 79 chart 13

2020 Communications / Correspondence FYI Letter: All Diocesan Administrators (via email) including: Mid-November • Advising Imputed Income reports will soon be available 23 24 25 26 27 Imputed Income Notification Letter: All Diocesan Administrators (via email): Late November • Advising Imputed Income Reports available: 12/1/20 via DAW and MLPS • Reviewing the summary of Imputed Income 2020 • IRC Section 79 Chart 30 1 2 3 4 Mid-December Personalized Letter with Imputed Income total to clergy (via mail) • Summary of Imputed Income 2020 14 15 16 17 18 • Website link to IRC Section 79 Chart 14

Imputed Income Report 2020 Available: December 1, 2020 If you have questions concerning Imputed Income reporting, please send them to: ImputedIncome@cpg.org 15

Diocesan Administrators Website 16

Diocesan Administrators Website (cont’d) 17

Diocesan Administrators Website (cont’d) 18

Contact Us If you have questions concerning Imputed Income reporting, please send them to: ImputedIncome@cpg.org Church Pension Group 19 East 34th Street New York, NY 10016 19

Questions and Discussion 20

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