Imputed Income from Your Life Insurance Coverage
The value of your postretirement life insurance over $50,000 (as determined by IRS tables) is includible as additional income on your 1099-R as imputed income. This "imputed income" is based on your age and rates set by the IRS. Imputed income is calculated each month and is automatically included in the wages shown on your retirement pay statement as well as your annual 1099-R form.
The formula for calculating imputed income is as follows:
(Total Amount of Coverage - $50,000)/$1,000
Monthly rate from IRC Section 79 Table for retiree's age
Monthly Imputed Income
Here's an example of how imputed income is calculated:
A 73-year-old retiree has Postretirement Life Insurance coverage in the amount of $88,000. Therefore, he/she must pay imputed income tax on the value of his/her life insurance in excess of $50,000, or $38,000 ($88,000 minus $50,000).
In this example, the calculation would be as follows:
($88,000 - $50,000)/$1,000
$78.28 per month
This retiree will have approximately $939 in imputed income reported on his/her annual 1099-R form.