Calculating the Reportable Life Insurance for Sarah, Karen, and Bob

To calculate the reportable life insurance for Neil's dependents, the Benefits Administration application uses the greater of the following two calculations.

Because the pretax premium is greater than the cost calculated from the group life W-2 table, the Benefits Administration application uses the pretax premium as the cost for Neil's dependent life insurance.

  1. Using the group life W-2 table, the Benefits Administration application calculates the amount of reportable life insurance for Neil's dependents as follows:

    • Sarah has $10,000 ($10,000 is greater than $2,000) in excess coverage.

    • The cost for her excess life insurance is $1.00 ($10,000/1,000 * 0.10).

    • Karen and Bob each have $5,000 ($5,000 is greater than $2,000) in excess coverage.

    • The cost for each of their excess life insurance is $0.30 ($5,000/1,000 * 0.08).

      The total cost of life insurance for Sarah, Karen, and Bob is $1.60 ($1.00 + 0.30 + 0.30).

  2. The total pretax premium for Neil's dependent life plan for one month is $3.54.