University Controller Holly Reynolds reminds us that 3/4th-time and full-time employees automatically receive a great benefit from the university: a life insurance policy worth 2.5 times the annual salary. That means if you make $50,000 a year, you´re automatically entitled to $125,000 worth of life insurance. The bad news here is that the Internal Revenue Service also thinks that´s a great benefit and, as a result, requires the university to withhold tax on the cost for the premium cost on any insurance more than $50,000. That means for someone who is 40-45 years old making $50,000, the cost of that extra $75,000 worth of insurance adds about $91 a year to your taxable income, so tax will be withheld from final 2011 paychecks for that amount – about $5 for that hypothetical employee -to cover the additional Social Security and Medicare taxes on this premium.
Similar tax issues affect employees who take advantage of the graduate school tuition benefit for employees and family members. They will also see some small reductions in the net amounts of their paychecks to cover the Social Security and Medicare taxes on the graduate tuition benefit amount that exceeds $5,250 for the employee and the full amount of graduate tuition benefits for spouses and dependents. If there is an adjustment due to graduate tuition waiver, you have already been contacted about it.
Wednesday, December 14, 2011