Year-End Benefit Planning and Accounting Treatment

Group Term Life Insurance

The accounting for the group term life premium is straightforward. The group term life premium would be shown as an expense on the employer's income statement. Since the group term life premium represents the cost of the death benefit and does not increase the cash value, the accounting treatment should be the same as a group term life insurance policy. The journal entry below is an example of how an employer would record the payment of the group term life premium (e.g., where the premium is $85,000, total premium is $100,000). Although account titles will vary from employer to employer, since the employer is not the beneficiary of the group term life death benefit, the account title for the expense should reflect that the expense was incurred for an employee benefit. An account title such as “Expense ' life insurance” may be misleading since this is a title often used for key person insurance, where the employer is the beneficiary of the policy. Since the employer cannot be beneficiary of the group term life premium, an account title such as “Expense ' employee benefits” is more appropriate.