Determining the Cost of Excess Dependent Coverage

To determine the cost of an employee's excess dependent coverage, the Benefits Administration application uses the larger result from the either of the following two calculations.

From whichever amount is greater from calculations 1 and 2, the application subtracts the amount of after-tax dollars the employee paid for all reportable dependent life insurance benefits.

The result is the reportable amount of excess life insurance for one month for the employee's dependents.

  1. Cost from group life W-2 table

    For each dependent, the Benefits Administration application adds the coverage amount for all reportable life insurance benefits that cover the dependent. The application compares this amount with the excludable amount of life insurance, which is defined on the Exclusions: Dependent Life field on Group Life W-2 Table (BN00.4). If the reportable life insurance amount is greater than the excludable amount, the application uses the entire reportable life insurance amount as the excess coverage amount.

    The result is each dependent's amount of excess coverage for one month.

    To determine the cost of excess life insurance for each dependent, the Benefits Administration application performs the following calculations.

    1. Calculates the cost for each dollar of excess coverage based on the value of the Frequency field in Life Insurance Reportable Income (BN150) and the Monthly Cost Per field in BN00.4.

      • If the Frequency field is Monthly, the cost for each dollar of excess coverage equals the value in the Monthly Cost Per field.

      • If the Frequency field is Annual, the Monthly Cost Per field is multiplied by 12 to annualize the monthly cost.

      • If the Frequency field is Pay Period, the Monthly Cost Per field is multiplied by 12, then divided by the employee's pay frequency (for example, 12, 24, 26, or 52).

        The result is cost per dollar of coverage for the year, month, or pay period.

    2. Calculates the cost of excess life insurance based on the following equation:

      Excess coverage / Cost for each dollar of coverage * Cost for dependent's age group = Cost of excess life insurance

      The application totals the cost for each dependent.

      The result is annual, monthly, or pay period cost of reportable excess life insurance for the employee's dependents.

  2. Pretax cost

    The Benefits Administration application determines the amount of pretax dollars the employee paid for all reportable dependent life insurance benefits as follows:

    • The Benefits Administration application adds the pretax contribution for all reportable dependent life insurance benefits, resulting in the annual pretax cost.

    • If the Frequency field is Monthly, the annual pretax cost is divided by twelve, resulting in the monthly pretax cost.

    • If the Frequency field is Pay Period, the pretax cost is divided by the employee's pay frequency (12, 24, 26 or 52), resulting in the pay period pretax cost.