The Internal Revenue Service discusses circumstances under which some portion of Group Term Life Insurance premiums may be taxable.

Section 79 permits up to $50,000 of group term life insurance coverage paid for by an employer (carried directly or indirectly) to be considered tax-free if the plan is non-discriminatory (i.e. does not favor key employees). Every year, employers must calculate the tax consequences of offering employees more than $50,000 in employer-paid term life coverage. Employers must also test the plan to make sure it does not favor key employees. If it does, those key
employees have to pay additional taxes. Employers also need to review their voluntary life coverage to determine whether any income needs to be imputed on the voluntary plan because of the voluntary rate table. Finally, organizations allowing employees to pay for life insurance with pretax dollars will likely need to
impute income for that coverage as well. There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be
included in income, using the IRS Premium Table, and are subject to social security and Medicare taxes.