Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 75-91

1975-1 C.B. 39

Sec. 79

IRS Headnote

Group-term life insurance purchased for employees. A group insurance policy providing life insurance protection in the form of level premium five-year term insurance with no cash surrender value, paid-up value, or other equivalent benefits, covering employees only while they are included in the plan, and paid for by the employer's contribution, can be considered as group-term life insurance, within the meaning of section 1.79-1(b)(1)(i) of the regulations, to which such level premium is properly allocable; Rev. Rul. 71-360 clarified.

Full Text

Rev. Rul. 75-91

The Internal Revenue Service has been asked whether certain life insurance protection provided by employer contributions under a policy of group insurance is considered group-term life insurance within the meaning of section 1.79-1(b)(1)(i) of the Income Tax Regulations.

The group insurance policy in question provides life insurance protection for employees in the form of level premium five-year term insurance. It does not provide any other benefit such as paid-up value, cash surrender value, or an equivalent benefit.

Section 79 of the Internal Revenue Code of 1954 allows an employee in certain cases to exclude from gross income the cost of up to $50,000 of group-term life insurance purchased by his employer.

Section 1.79-1(b)(1)(i) of the regulations provides that group-term life insurance is term life insurance provided under a plan of group insurance as defined in section 1.79-1(b)(1)(iii).

Rev. Rul. 71-360, 1971-2 C.B. 87, holds that the so-called pure insurance protection provided under a policy of permanent insurance is not group-term life insurance within the meaning of section 79 of the Code. Rev. Rul. 71-360 also states that a premium is not properly allocable to group-term life insurance if it is a level premium.

For purposes of section 79 of the Code, a level premium group policy that provides only life insurance protection for a term not exceeding five years is not considered a policy of permanent insurance, provided the individual employee's coverage under the policy ceases whenever the employee ceases to be included in the employer's plan of group insurance. The premium for such a policy can be considered properly allocable to group-term life insurance even though it is a level premium, since no benefit other than the term insurance protection is available to the employee or his beneficiary.

Rev. Rul. 71-360 is clarified.