Adobe Captivate
Slide number
Monday, March 07, 2016
Updated Closed Caption Data
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In this session we will discuss the Life Insurance benefits offered through the State Employee Group
Insurance Program (SEGIP).
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The state offers a basic life insurance policy to employees. Managers are eligible for a separate life
insurance plan. If you are a manager please exit this presentation and click on the presentation titled
Manager’s Income Protection Plan.
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Before we explore the Life Insurance polices available to state employees, let's cover some key
terminology.
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Evidence of Insurability: The requirement to complete a health questionnaire and authorization for the
plan to access medical records, and if requested, a medical exam.
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Double Indemnity: The value of your life insurance policy automatically doubles in the event of an
accidental death.
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Underwriting: The risk assessment of state employees who wish to enroll either themselves or their
dependents into a life insurance policy outside of their newly eligible time frame.
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The value of the basic life insurance policy may vary based on the your contract. This is a term life policy
which is typically equal to 1 X your annual salary. Check your union or benefits contract for detailed
information.
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The value of life insurance coverage automatically doubles in the event of an accidental death, whether it
happens on or off the job.
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If the value of your state-paid basic life insurance coverage is over $50,000 it is considered taxable
income for federal, state, and FICA purposes.
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If you waive life insurance amounts above $50,000 you will not receive coverage over this amount,
regardless of your salary level. If you later want to reverse your decision of coverage over the $50,000,
you must submit evidence of insurability to determine whether or not this will be allowed to carry life
insurance over $50,000.
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Group Term Life insurance that is paid for by the employer in amounts greater than fifty-thousand
($50,000) are treated as a fringe benefit by the IRS.
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This means the IRS needs to tax you on the value of the benefit that is being paid for by your employer.
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The IRS has a table, available in Publication 15B, which indicates the amount that will be considered
taxable income. The table only creates an amount on which you will be taxed. It is not a deduction for the
benefit of having life insurance over fifty-thousand ($50,000).
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In most cases it is less expensive to pay the taxes on the monthly value of coverage versus purchasing
and paying the premium for the same amount of Optional Life coverage.
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Since this is a complicated matter, let’s look at an example to help explain how this process works.
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An employee who is 45 with $55,000 in basic term life coverage would end up paying an estimated
additional 7 to 8-cents in taxes, after making the appropriate calculations using the IRS table.
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For this same 45-year old employee to purchase an additional $5,000 in Optional Life coverage would be
$0.28 per check. As you can see, the 7 to 8-cents in taxes is a lower cost than paying the premium cost
for the same amount of Optional Life coverage.
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The amount that becomes taxable will increase as the amount of your life insurance over the $50,000
increases and as your age increases.
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So, what are some situations in which an employee would waive insurance above $50,000?
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Sometimes it is employees who feel as if they have enough life insurance through other sources and they
do not need additional coverage and don’t want to have even a small taxation deduction from their check.
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As an employee, you need to consider your own life circumstances to decide whether or not to waive
coverage above $50,000.
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If you feel you do not want to be taxed for the portion above $50,000 you do have the option to waive the
portion above the $50,000. Please refer to your newly eligible enrollment packet for instructions on how to
waive.
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You will be automatically enrolled in basic life, however you must name a beneficiary.
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Designating a beneficiary is simple. This is done through the Minnesota Life online website. After you
have been hired, you will receive a personalized welcome packet from MN Life providing you with
instructions on how to designate a beneficiary and your user ID and password information.
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You have the option to manage and change your beneficiary designation at any time.
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In addition to your basic life insurance policy provided by the state you also have the ability to enroll in
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optional life insurance coverage for yourself, your spouse, and your child(ren).
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These policies are also term life policies. The maximum benefit for employee and spouse is $500,000
each and can be purchased in increments of $5,000 on an age rated basis.
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As a newly eligible participant you have the ability to enroll for as much as 2X your annual salary for your
Employee Optional Life insurance policy without providing evidence of insurability.
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If you are enrolling in Spouse Life you may select $5,000 or $10,000 worth of coverage without evidence
of insurability.
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If you are applying for amounts above 2x your annual salary, and above $10,000 for Spouse Life, you
must provide evidence of insurability by completing the optional form.
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The optional application form is available on the MMB website.
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Underwriting will be performed by Minnesota Life and they will determine if the policy can be placed.
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As a newly eligible insurance participant you also have the option to enroll your eligible children into a life
insurance policy.
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The Child Life insurance policy is a term life insurance policy that is valued at $10,000 for each eligible
child. Regardless of the number of eligible children you enroll, you pay one flat premium rate.
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To find more information regarding rates for your life insurance plans, please visit the Minnesota
Management & Budget website under the Insurance and Wellness section located on the left side of the
page within the gray box.
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If you do not enroll when you are newly eligible, you may only apply for coverage with evidence of
insurability.
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Please note that this means that your application will be reviewed by the MN Life underwriting department
and they will determine if coverage will be granted.
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Accidental Death & Dismemberment (AD&D) is available for you and your eligible spouse.
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You can sign up for AD&D coverage at any time during the year. No health questions are asked because
the insurance protects for accidental loss only.
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You may select coverage in increments of $5,000 and up to $100,000 if you are under age sixty-one (61.
The maximum for age sixty-one (61) and older is $50,000. Spouse AD&D is available to a maximum of
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$25,000.
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However, you may not have more coverage for your spouse than you have for yourself.
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AD&D is not the same as life insurance. AD&D coverage provides a death benefit ONLY if your death is
the direct result of an ACCIDENT.
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If death results from an illness, no benefits are paid. The Dismemberment feature provides a prorated
benefit for loss of limb or eyesight if that loss is due to accidental injury.
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To find more information regarding Life Insurance and AD&D coverage and rates, please visit the
Minnesota Management & Budget website.
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We hope that you have gained a better understanding of the life insurance benefit provided through the
State Employee Group Insurance Program (SEGIP).
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If you have additional questions, please refer to your newly eligible packet, visit our website at
www.mmb.state.mn.us under the Insurance & Wellness section located on the left side of the page in the
gray box, contact us at 651-355-0100 or review your union contract or plan.
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Please take some time to review our other newly eligible presentations available to you.
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