To amend the Internal Revenue Code of 1986 to increase the dollar limitation on employer-provided group term life insurance that can be excluded from the gross income of the employee.

January 4, 2005

Mr. BURGESS introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to increase the dollar limitation on employer-provided group term life insurance that can be excluded from the gross income of the employee.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. FINDINGS.

Congress finds the following:

(1) The primary purpose of group term life insurance is to providefamilieswith protection against the economic loss arising from the death of the principal family income producer.

(2) The Revenue Act of 1964 (Public Law 88-272) required individuals to pay an imputed income tax on the current value of employer-provided group term life insurance policies of more than $50,000.

(3) The value of the $50,000 limitation has steadily decreased since 1964 because the limitation was not indexed for inflation.

(4) The number of individuals affected by the $50,000 limitation in 1964 was estimated to be somewhere between 0.5 percent and 1 percent of the total number of individuals who received employer sponsored group term life insurance.

(5) The Department of the Treasury estimated that in 1999, 18.1 percent of employees receiving group term life insurance were affected by the $50,000 limitation (13.6 million of the 75 million total recipients of employer sponsored group term life insurance).

(6) If the $50,000 limitation had been indexed for inflation in 1964, the limitation would have been approximately $300,000 by 2004.

SEC. 2. INCREASE IN LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED GROUP TERM LIFE INSURANCE PURCHASED FOR EMPLOYEES.

(a) In General- Paragraph (1) of section 79(a) of the Internal Revenue Code of 1986 is amended by striking `$50,000' and inserting `$300,000'.

(b) Inflation Adjustment- Section 79 of such Code (relating to group-term life insurance purchased for employees) is amended by adding at the end the following new subsection:

`(f) Inflation Adjustment-

`(1) IN GENERAL- In the case of a taxable year beginning after 2005, the $300,000 amount under subsection (a)(1) shall be increased by an amount equal to--

`(A) such dollar amount, multiplied by

`(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `2004' for `1992' in subparagraph (B) thereof.

`(2) ROUNDING- If any amount as adjusted under paragraph (1) is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.'.

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

END