This policy gets its name from Section 79 of the Internal Revenue Code, which permits employers to offer group life insurance coverage to their employees as a benefit of working for the business, and details the tax requirements for companies looking to implement those plans.
Most group life insurance plans offer your employees term life insurance coverage under a master policy purchased by your company. Your employees who choose to enroll will receive certificates of insurance coverage indicating the amount of coverage they opted for under your plan. The employee then names a personal beneficiary to receive this death benefit should the unthinkable happen.
Does this life insurance policy cover my employees indefinitely?
Unfortunately, no there are some limitations. Group term coverage ends upon retirement or termination of employment unless the employee chooses to convert their policy to an individual coverage policy.
What are some other benefits to Section 79 plans?
These plans can also offer permanent life insurance options, as well as tax deductions for the sponsoring employers.
What types of companies are optimal for Section 79 plans?
Any business can adopt a group permanent plan to benefit all employees, including non-owner employees. However, if an owner-employee is participating in the plan, the business must be organized as a C-Corporation. Independent contractors, partners in a partnership, members of an LLC, and sole proprietors are NOT permitted to receive any group life insurance benefits under Section 79.