As the 2025 open enrollment period kicks off from November 1 to November 30, 2024, it’s time for TPMG (The Permanente Medical Group) Physicians—both active and retired—to evaluate their benefit options. One often-overlooked yet highly valuable perk is company-paid life insurance. This benefit not only offers financial protection for your loved ones but also delivers cost-effective peace of mind. Let’s dive into why this is a standout choice during this enrollment season.
The Appeal of Company-Paid Life Insurance
Company-paid life insurance is a valuable benefit provided by TPMG, with the full premium covered on your behalf. While it does introduce the concept of “imputed tax liability” for coverage exceeding $50,000, the financial and emotional benefits often outweigh the tax implications.
Key Benefits of Company-Paid Life Insurance
- Financial Security for Your Loved Ones
In the event of your passing, this benefit ensures that your beneficiaries receive a payout. These funds can cover essential expenses such as funeral costs, outstanding debts, or ongoing financial support, providing a safety net for your family during a challenging time.
- Cost Savings
Since TPMG pays the premium, you save the expense of purchasing a comparable policy out-of-pocket. Even with the small, imputed tax liability for coverage over $50,000, the overall cost savings and peace of mind make this an advantageous option.
- Convenience
Unlike individual policies that often require medical exams and lengthy applications, company-paid life insurance is straightforward and hassle-free. There’s no need to worry about premium payments or policy renewals, as everything is handled through your employer.
Understanding Imputed Tax Liability
When your life insurance coverage exceeds $50,000, the IRS (Internal Revenue Service) considers the value of this excess coverage a taxable fringe benefit. The “imputed income” is added to your W-2 and is subject to income tax, FICA, and Medicare.
While this might sound daunting, the actual tax cost is often minimal compared to the benefit’s value. For example, the cost of additional coverage is based on a standardized IRS table that calculates monthly taxable amounts per $1,000 of coverage, which tends to be quite low.
Options to Minimize Tax Impact
- Maintain Lower Coverage
If you want to avoid imputed tax entirely, you can limit your coverage to $50,000. However, reducing your coverage could mean less financial protection for your family.
- Weighing the Trade-Offs
For most physicians, the tax liability is a small price to pay for the substantial financial security that higher coverage offers. Carefully consider your family’s needs and overall financial situation before opting to reduce coverage.
Customizing Your Life Insurance Plan
TPMG provides group term life insurance at varying levels depending on your physician status, with the option to elect additional coverage through MD Benefits. The maximum coverage available is up to four times your prorated base salary, capped at $2,000,000.
- Automatic Coverage
If you waive additional TPMG-provided life insurance, you still receive $50,000 in coverage at no cost.
- Electing Additional Coverage
To increase coverage, you’ll need to submit an application to MD Benefits. The Standard Insurance Company may require evidence of insurability for approval. Coverage becomes effective once approved.
Final Thoughts
Company-paid life insurance is a highly valuable benefit that TPMG Physicians should carefully consider during open enrollment. While the imputed tax liability may initially seem like a drawback, the cost is negligible compared to the financial protection and peace of mind it offers.
This open enrollment season, take a close look at your life insurance options, maximize the benefits TPMG provides, and ensure your loved ones are well-protected. If you need help evaluating your choices, reach out to a financial planner to tailor the best strategy for your situation.
Capital Advantage is a “fee-only” financial advisor and has had direct experience in TPMG Physican Benefits for over 30 years. If you have a simple question, please reach out. We’re here to help if you need it.
Your family’s future is worth it—secure it today.
Disclaimer: Capital Advantage, Inc. is not affiliated, associated, authorized, endorsed by, or in any way officially connected with Kaiser Permanente® or TPMG (The Permanente Medical Group).
