Employee-paid does not mean outside the tax rule, and the regulation says why in one sentence. Section 79(a) of the tax code includes in an employee's income the cost of group-term life insurance "carried directly or indirectly by his employer," to the extent that cost exceeds the sum of the cost of $50,000 of such insurance and the amount the employee paid toward it. The definition of what is carried by the employer sits in 26 CFR 1.79-0, and it has two limbs. The first is obvious: the employer pays part of the cost, directly or through another person. The second is not. A policy is also carried by the employer if the employer "or two or more employers arrange for payment of the cost of the life insurance by their employees and charge at least one employee less than the cost of his or her insurance, as determined under Table I of section 1.79-3(d)(2), and at least one other employee more than the cost of his or her insurance, determined in the same way."
That second limb is the mechanism behind the whole page, and practitioners call it the straddle. A voluntary plan almost always charges by age band, and the IRS table is also banded by age but with its own rates. Wherever the plan's rate for one band sits below the table rate and another band's sits above it, the plan straddles the table, and the employer is treated as carrying the coverage even though it contributes nothing. The consequence is that supplemental amounts are then folded into the section 79 calculation with the base coverage: the same $50,000 exclusion applies once across the whole group-term total, the imputed cost comes from the IRS table rather than from what anyone actually paid, and what the employee paid is subtracted from that figure. Published material on employer coverage rarely mentions this, which is why an employee occasionally sees imputed income on a plan they were told they were paying for themselves.
The guaranteed issue amount is the other thing worth knowing before open enrollment closes. Voluntary plans normally let an employee elect up to a stated amount with no health questions during an initial eligibility window, and require evidence of insurability above it, for later increases, or for anyone enrolling after their first opportunity. The window is the valuable part: an employee who takes the coverage when first offered gets it without underwriting, and one who waits usually does not. That matters most for exactly the people who benefit most from group coverage, since a health change between the first offer and the later election is what makes the underwriting bite.
Whether to take it, stated as a comparison rather than a rule. Group rates are set for the workforce as a whole and banded broadly, while an individually underwritten term policy is priced on one person's age, health and tobacco use. For someone young, healthy and a non-smoker, an individual policy frequently costs less per dollar of coverage than the supplemental layer, and it does not end when the job does. For someone whose health would produce a rated offer or a decline, the supplemental layer up to the guaranteed issue amount is often the cheapest coverage available anywhere and is worth taking to the limit. The question is not which product is better but which side of that line the particular employee is on, and the way to answer it is to price an individual policy for the same face amount and compare.
The exit is the recurring disappointment. Supplemental coverage ends with employment unless the plan offers portability, which continues the group term coverage for a period, or conversion, which turns it into an individual permanent policy without new medical evidence and at a substantially higher premium. A plan may offer one, both or neither, and both are normally available only for a short window after coverage ends. That is the fact to establish before relying on the coverage for a need that outlasts the job.
