
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC79]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
          PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
 
Sec. 79. Group-term life insurance purchased for employees


(a) General rule

    There shall be included in the gross income of an employee for the 
taxable year an amount equal to the cost of group-term life insurance on 
his life provided for part or all of such year under a policy (or 
policies) carried directly or indirectly by his employer (or employers); 
but only to the extent that such cost exceeds the sum of--
        (1) the cost of $50,000 of such insurance, and
        (2) the amount (if any) paid by the employee toward the purchase 
    of such insurance.

(b) Exceptions

    Subsection (a) shall not apply to--
        (1) the cost of group-term life insurance on the life of an 
    individual which is provided under a policy carried directly or 
    indirectly by an employer after such individual has terminated his 
    employment with such employer and is disabled (within the meaning of 
    section 72(m)(7)),
        (2) the cost of any portion of the group-term life insurance on 
    the life of an employee provided during part or all of the taxable 
    year of the employee under which--
            (A) the employer is directly or indirectly the beneficiary, 
        or
            (B) a person described in section 170(c) is the sole 
        beneficiary,

    for the entire period during such taxable year for which the 
    employee receives such insurance, and
        (3) the cost of any group-term life insurance which is provided 
    under a contract to which section 72(m)(3) applies.

(c) Determination of cost of insurance

    For purposes of this section and section 6052, the cost of group-
term insurance on the life of an employee provided during any period 
shall be determined on the basis of uniform premiums (computed on the 
basis of 5-year age brackets) prescribed by regulations by the 
Secretary.

(d) Nondiscrimination requirements

                           (1) In general

        In the case of a discriminatory group-term life insurance plan--
            (A) subsection (a)(1) shall not apply with respect to any 
        key employee, and
            (B) the cost of group-term life insurance on the life of any 
        key employee shall be the greater of--
                (i) such cost determined without regard to subsection 
            (c), or
                (ii) such cost determined with regard to subsection (c).

          (2) Discriminatory group-term life insurance plan

        For purposes of this subsection, the term ``discriminatory 
    group-term life insurance plan'' means any plan of an employer for 
    providing group-term life insurance unless--
            (A) the plan does not discriminate in favor of key employees 
        as to eligibility to participate, and
            (B) the type and amount of benefits available under the plan 
        do not discriminate in favor of participants who are key 
        employees.

          (3) Nondiscriminatory eligibility classification

        (A) In general

            A plan does not meet requirements of subparagraph (A) of 
        paragraph (2) unless--
                (i) such plan benefits 70 percent or more of all 
            employees of the employer,
                (ii) at least 85 percent of all employees who are 
            participants under the plan are not key employees,
                (iii) such plan benefits such employees as qualify under 
            a classification set up by the employer and found by the 
            Secretary not to be discriminatory in favor of key 
            employees, or
                (iv) in the case of a plan which is part of a cafeteria 
            plan, the requirements of section 125 are met.

        (B) Exclusion of certain employees

            For purposes of subparagraph (A), there may be excluded from 
        consideration--
                (i) employees who have not completed 3 years of service;
                (ii) part-time or seasonal employees;
                (iii) employees not included in the plan who are 
            included in a unit of employees covered by an agreement 
            between employee representatives and one or more employers 
            which the Secretary finds to be a collective bargaining 
            agreement, if the benefits provided under the plan were the 
            subject of good faith bargaining between such employee 
            representatives and such employer or employers; and
                (iv) employees who are nonresident aliens and who 
            receive no earned income (within the meaning of section 
            911(d)(2)) from the employer which constitutes income from 
            sources within the United States (within the meaning of 
            section 861(a)(3)).

                   (4) Nondiscriminatory benefits

        A plan does not meet the requirements of paragraph (2)(B) unless 
    all benefits available to participants who are key employees are 
    available to all other participants.

                          (5) Special rule

        A plan shall not fail to meet the requirements of paragraph 
    (2)(B) merely because the amount of life insurance on behalf of the 
    employees under the plan bears a uniform relationship to the total 
    compensation or the basic or regular rate of compensation of such 
    employees.

                      (6) Key employee defined

        For purposes of this subsection, the term ``key employee'' has 
    the meaning given to such term by paragraph (1) of section 416(i). 
    Such term also includes any former employee if such employee when he 
    retired or separated from service was a key employee.

                   (7) Exemption for church plans

        (A) In general

            This subsection shall not apply to a church plan maintained 
        for church employees.

        (B) Definitions

            For purposes of subparagraph (A), the terms ``church plan'' 
        and ``church employee'' have the meaning given such terms by 
        paragraphs (1) and (3)(B) of section 414(e), respectively, 
        except that--
                (i) section 414(e) shall be applied by substituting 
            ``section 501(c)(3)'' for ``section 501'' each place it 
            appears, and
                (ii) the term ``church employee'' shall not include an 
            employee of--
                    (I) an organization described in section 
                170(b)(1)(A)(ii) above the secondary school level (other 
                than a school for religious training),
                    (II) an organization described in section 
                170(b)(1)(A)(iii), and
                    (III) an organization described in section 
                501(c)(3), the basis of the exemption for which is 
                substantially similar to the basis for exemption of an 
                organization described in subclause (II).

                  (8) Treatment of former employees

        To the extent provided in regulations, this subsection shall be 
    applied separately with respect to former employees.

(e) Employee includes former employee

    For purposes of this section, the term ``employee'' includes a 
former employee.

(Added Pub. L. 88-272, title II, Sec. 204(a)(1), Feb. 26, 1964, 78 Stat. 
36; amended Pub. L. 89-97, title I, Sec. 106(d)(3), July 30, 1965, 79 
Stat. 337; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 
90 Stat. 1834; Pub. L. 97-248, title II, Sec. 244(a), Sept. 3, 1982, 96 
Stat. 523; Pub. L. 98-369, div. A, title II, Sec. 223(a), (b), July 18, 
1984, 98 Stat. 775; Pub. L. 99-514, title XI, Sec. 1151(c)(1), title 
XVIII, Sec. 1827(a)(1), (c), (d), Oct. 22, 1986, 100 Stat. 2503, 2850, 
2851; Pub. L. 100-647, title V, Sec. 5013(a), Nov. 10, 1988, 102 Stat. 
3666; Pub. L. 101-140, title II, Sec. 203(a)(1), (b)(1)(A), Nov. 8, 
1989, 103 Stat. 830, 831; Pub. L. 101-508, title XI, Sec. 11703(e)(1), 
Nov. 5, 1990, 104 Stat. 1388-517.)


                               Amendments

    1990--Subsec. (d)(6). Pub. L. 101-508 substituted ``any former 
employee'' for ``any retired employee''.
    1989--Subsec. (d). Pub. L. 101-140, Sec. 203(a)(1), amended subsec. 
(d) to read as if amendments by Pub. L. 99-514, Sec. 1151(c)(1), had not 
been enacted, see 1986 Amendment note below.
    Subsec. (d)(7). Pub. L. 101-140, Sec. 203(b)(1)(A), amended par. (7) 
generally. Prior to amendment, par. (7) read as follows: ``All employees 
who are treated as employed by a single employer under subsection (b), 
(c), or (m) of section 414 shall be treated as employed by a single 
employer for purposes of this section.''
    1988--Subsec. (c). Pub. L. 100-647 struck out at end ``In the case 
of an employee who has attained age 64, the cost prescribed shall not 
exceed the cost with respect to such individual if he were age 63.''
    1986--Subsec. (d). Pub. L. 99-514, Sec. 1151(c)(1), amended subsec. 
(d) generally, substituting ``In the case of a group-term life insurance 
plan which is a discriminatory employee benefit plan, subsection (a)(1) 
shall apply only to the extent provided in section 89.'' for provisions 
formerly designated as pars. (1)(A) and (B) that in the case of a 
discriminatory group-term life insurance plan subsec. (a)(1) shall not 
apply with respect to any key employee and the cost of group-term life 
insurance on the life of any key employee shall be determined without 
regard to subsec. (c), and striking out pars. (2) to (7) relating to 
classifications and eligibility classifications of nondiscriminatory 
plans.
    Subsec. (d)(1)(B). Pub. L. 99-514, Sec. 1827(a)(1), amended subpar. 
(B) generally. Prior to amendment, subpar. (B) read as follows: ``the 
cost of group-term life insurance on the life of any key employee shall 
be determined without regard to subsection (c).''
    Subsec. (d)(6). Pub. L. 99-514, Sec. 1827(c), struck out ``, except 
that subparagraph (A)(iv) of such paragraph shall be applied by not 
taking into account employees described in paragraph (3)(B) who are not 
participants in the plan'' from first sentence and inserted provision 
that such term also includes any retired employee if such employee when 
he retired or separated from service was a key employee.
    Subsec. (d)(8). Pub. L. 99-514, Sec. 1827(d), added par. (8).
    1984--Subsec. (b)(1). Pub. L. 98-369, Sec. 223(a)(2), struck out 
``either has reached the retirement age with respect to such employer 
or'' before ``is disabled''.
    Subsec. (d)(1). Pub. L. 98-369, Sec. 223(b), designated existing 
provisions as subpar. (A) and added subpar. (B).
    Subsec. (e). Pub. L. 98-369, Sec. 223(a)(1), added subsec. (e).
    1982--Subsec. (d). Pub. L. 97-248 added subsec. (d).
    1976--Subsec. (c). Pub. L. 94-455 struck out ``or his delegate'' 
after ``Secretary''.
    1965--Subsec. (b)(1). Pub. L. 89-97 substituted ``section 72(m)(7)'' 
for ``paragraph (3) of section 213(g), determined without regard to 
paragraph (4) thereof''.


                    Effective Date of 1990 Amendment

    Section 11703(e)(2) of Pub. L. 101-508 provided that: ``The 
amendment made by paragraph (1) [amending this section] shall apply to 
employees separating from service after the date of the enactment of 
this Act [Nov. 5, 1990].''


                    Effective Date of 1989 Amendment

    Section 203(c) of Pub. L. 101-140 provided that: ``The amendments 
made by this section [amending this section and sections 105, 117, 120, 
125, 127, 129, 132, 162, 401, 414, 505, 3121, 3231, 3306, 3401, 4976, 
and 6652 of this title, section 409 of title 42, The Public Health and 
Welfare, and provisions set out as notes under sections 89 and 3121 of 
this title] shall take effect as if included in section 1151 of the Tax 
Reform Act of 1986 [Pub. L. 99-514, see section 1151(k) set out 
below].''


                    Effective Date of 1988 Amendment

    Section 5013(b) of Pub. L. 100-647 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years beginning after December 31, 1988.''


                    Effective Date of 1986 Amendment

    Section 1151(k) of Pub. L. 99-514, as amended by Pub. L. 100-647, 
title I, Sec. 1011B(a)(25), (26), Nov. 10, 1988, 102 Stat. 3486, 
provided that:
    ``(1) In general.--The amendments made by this section [enacting 
section 89 of this title and amending this section and sections 105, 
106, 117, 120, 125, 127, 129, 132, 414, 505, 6039D, and 6652 of this 
title] shall apply to years beginning after the later of--
        ``(A) December 31, 1987, or
        ``(B) the earlier of--
            ``(i) the date which is 3 months after the date on which the 
        Secretary of the Treasury or his delegate issues such 
        regulations as are necessary to carry out the provisions of 
        section 89 of the Internal Revenue Code of 1986 (as added by 
        this section), or
            ``(ii) December 31, 1988.
Notwithstanding the preceding sentence, the amendments made by 
subsections (e)(1) and (i)(3)(C) [amending section 414 of this title] 
shall, to the extent they relate to sections 106, 162(i)(2), and 162(k) 
of the Internal Revenue Code of 1986, apply to years beginning after 
1986.
    ``(2) Special rule for collective bargaining plan.--In the case of a 
plan maintained pursuant to 1 or more collective bargaining agreements 
between employee representatives and 1 or more employers ratified before 
March 1, 1986, the amendments made by this section [enacting section 89 
of this title and amending this section and sections 105, 106, 117, 120, 
125, 127, 129, 132, 414, 505, 6039D, and 6652 of this title] shall not 
apply to employees covered by such an agreement in years beginning 
before the earlier of--
        ``(A) the date on which the last of such collective bargaining 
    agreements terminates (determined without regard to any extension 
    thereof after February 28, 1986), or
        ``(B) January 1, 1991.
A plan shall not be required to take into account employees to which the 
preceding sentence applies for purposes of applying section 89 of the 
Internal Revenue Code of 1986 (as added by this section) to employees to 
which the preceding sentence does not apply for any year preceding the 
year described in the preceding sentence.
    ``(3) Exception for certain group-term insurance plans.--In the case 
of a plan described in section 223(d)(2) of the Tax Reform Act of 1984 
[section 232(d)(2) of Pub. L. 98-369, set out as an Effective Date of 
1984 Amendment note below], such plan shall be treated as meeting the 
requirements of section 89 of the Internal Revenue Code of 1986 (as 
added by this section) with respect to individuals described in section 
223(d)(2) of such Act. An employer may elect to disregard such 
individuals in applying section 89 of such Code (as so added) to other 
employees of the employer.
    ``(4) Special rule for church plans.--In the case of a church plan 
(within the meaning of section 414(e)(3) of the Internal Revenue Code of 
1986) maintaining an insured accident and health plan, the amendments 
made by this section [enacting section 89 of this title and amending 
this section and sections 105, 106, 117, 120, 125, 127, 129, 132, 414, 
505, 6039D, and 6652 of this title] shall apply to years beginning after 
December 31, 1988.
    ``(5) Cafeteria plans.--The amendments made by subsection (d)(2) 
[amending sections 3121 and 3306 of this title and section 409 of Title 
42, The Public Health and Welfare] shall apply to taxable years 
beginning after December 31, 1983.
    ``(6) Certain plans maintained by educational institutions.--If an 
educational organization described in section 170(b)(1)(A)(ii) of the 
Internal Revenue Code of 1986 makes an election under this paragraph 
with respect to a plan described in section 125(c)(2)(C) of such Code, 
the amendments made by this section shall apply with respect to such 
plan for plan years beginning after the date of the enactment of this 
Act [Oct. 22, 1986].''
    Section 1827(a)(2) of Pub. L. 99-514 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to taxable 
years ending after the date of the enactment of this Act [Oct. 22, 
1986].''
    Amendment by section 1827(c), (d) of Pub. L. 99-514 effective, 
except as otherwise provided, as if included in the provisions of the 
Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment 
relates, see section 1881 of Pub. L. 99-514, set out as a note under 
section 48 of this title.


                    Effective Date of 1984 Amendment

    Section 223(d) of Pub. L. 98-369, as amended by Pub. L. 99-514, 
Sec. 2, title XVIII, Sec. 1827(b), Oct. 22, 1986, 100 Stat. 2095, 2850, 
provided that:
    ``(1) In general.--Except as provided in paragraph (2), the 
amendments made by this section [amending this section and section 83 of 
this title] shall apply to taxable years beginning after December 31, 
1983.
    ``(2) Inclusion of former employees in the case of existing group-
term insurance plans.--
        ``(A) In general.--The amendments made by subsection (a) 
    [amending this section] shall not apply--
            ``(i) to any group-term life insurance plan of the employer 
        in existence on January 1, 1984, or
            ``(ii) to any group-term life insurance plan of the employer 
        (or a successor employer) which is a comparable successor to a 
        plan described in clause (i),
    but only with respect to an individual who attained age 55 on or 
    before January 1, 1984, and was employed by such employer (or a 
    predecessor employer) at any time during 1983. Such amendments also 
    shall not apply to any employee who retired from employment on or 
    before January 1, 1984, and who, when he retired, was covered by the 
    plan (or a predecessor plan).
        ``(B) Special rule in the case of discriminatory group-term life 
    insurance plan.--In the case of any plan which, after December 31, 
    1986, is a discriminatory group-term life insurance plan (as defined 
    in section 79(d) of the Internal Revenue Code of 1986 [formerly 
    I.R.C. 1954]), subparagraph (A) shall not apply in the case of any 
    individual retiring under such plan after December 31, 1986.
        ``(C) Benefits to certain retired individuals not taken into 
    account for purposes of determining whether plan is 
    discriminatory.--For purposes of determining whether a plan 
    described in subparagraph (A) meets the requirements of section 
    79(d) of the Internal Revenue Code of 1986 with respect to group-
    term life insurance for former employees, coverage provided to 
    employees who retired on or before December 31, 1986, may, at the 
    employer's election, be disregarded.
        ``(D) Comparable successor plans.--For purposes of subparagraph 
    (A), a plan shall not fail to be treated as a comparable successor 
    to a plan described in subparagraph (A)(i) with respect to any 
    employee whose benefits do not increase under the successor plan.''


                    Effective Date of 1982 Amendment

    Section 244(b) of Pub. L. 97-248 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to taxable years 
beginning after December 31, 1983.''


                    Effective Date of 1965 Amendment

    Amendment by Pub. L. 89-97 applicable to taxable years beginning 
after Dec. 31, 1966, see section 106(e) of Pub. L. 89-97, set out as a 
note under section 213 of this title.


                             Effective Date

    Section 204(d) of Pub. L. 88-272, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendments 
made by subsections (a) [amending this section and section 7701 of this 
title] and (c) [amending sections 6052 and 6678 of this title] and 
paragraph (3) of section 6652(a) of the Internal Revenue Code of 1986 
[formerly I.R.C. 1954] (as amended by section 221(b)(2) of this Act), 
shall apply with respect to group-term life insurance provided after 
December 31, 1963, in taxable years ending after such date. The 
amendments made by subsection (b) [amending section 3401 of this title] 
shall apply with respect to remuneration paid after December 31, 1963, 
in the form of group-term life insurance provided after such date. In 
applying section 79(b) of the Internal Revenue Code of 1986 (as added by 
subsection (a)(1) of this section) to a taxable year beginning before 
May 1, 1964, if paragraph (2)(B) of such section applies with respect to 
an employee for the period beginning May 1, 1964, and ending with the 
close of his first taxable year ending after April 30, 1964, such 
paragraph (2)(B) shall be treated as applying with respect to such 
employee for the period beginning January 1, 1964, and ending April 30, 
1964.''


 Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99-514 for 
                            Fiscal Year 1990

    No monies appropriated by Pub. L. 101-136 to be used to implement or 
enforce section 1151 of Pub. L. 99-514 or the amendments made by such 
section, see section 528 of Pub. L. 101-136, set out as a note under 
section 89 of this title.


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 83, 125, 414, 505, 861, 
6039D, 6052, 7701 of this title.
