Imputed Income Calculation for Discriminatory Life Insurance Plans Are Incorrect
Last updated on DECEMBER 13, 2017
Applies to:PeopleSoft Enterprise HCM Human Resources - Version 9 to 9.2 [Release 9]
Information in this document applies to any platform.
1. Basic Items:
For discriminatory Life Insurance plans (i.e. for Executives), you cannot subtract out the first $50K of coverage prior to figuring imputed income -- per Internal Revenue Code Section 79 (needs to be validated).
The PSPDCLIF.cbl program does not take this into account. It subtracts $50K for everyone prior to computing Imputed Income. This issue is the subject of the bug reports below.
2. Additional Notes and Requirements:
According to the Commerce Clearing House (CCH) Payroll Management Guide entry on this subject, there is more required in this situation than just not excluding the first $50,000 of coverage from the standard imputed income calculation formula. From section 689 on page 1405 of CCH:
Where a discriminatory plan exists, the cost of group-term life insurance on the life of a key employee is the greater of the actual cost of the insurance or the cost determined based on the uniform premium table prescribed by the IRS.
This means that we would need to do everything we're currently doing in the imputed income calculation (but omitting the $50,000 exclusion), then also take the result of that calculation and compare it to the employer's actual cost of the employee's life insurance coverage, and report the higher of the two amounts as imputed income to the employee.
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