Definition
P.S. 58 Charges are the costs associated with the pure death benefit component of a life insurance policy, as determined by a special table issued by the IRS, commonly referenced in various insurance plans, including split dollar plans.
Meaning
In the context of liability insurance, P.S. 58 charges represent the economic value of the pure insurance protection provided to an employee under a life insurance policy, minus any contributions made by the employee.
Etymology
Derived from the Internal Revenue Code section known as “Public Service Bulletin 58 (P.S. 58),” which published guidelines to determine the taxable cost associated with life insurance protection.
Background
Introduced by the IRS as a measure to standardize the valuation of life insurance benefits for tax purposes, P.S. 58 charges ensure that the provided death benefits are appropriately taxed based on actuarial estimates.
Key Takeaways
- Determination: P.S. 58 charges are determined by IRS tables that consider age, gender, and other demographic factors.
- Economic Benefit: The charge represents the portion of the death benefit characterized as taxable income to the employee receiving life insurance as part of a compensation package.
- Employee Contributions: In plans like the split dollar plan, the taxable benefit is the difference between the P.S. 58 charges and any contribution made by the employee.
Differences and Similarities
Differences:
- P.S. 58 Charges vs. Premium Payments: Premium payments are the total paid for an insurance policy, while P.S. 58 charges specifically refer to the pure cost of death protection.
Similarities:
- Cost Metrics: Both concepts reflect elements of life insurance costs and are influenced by actuarial estimates.
Synonyms
- Death benefit cost
- Life insurance imputed income
Antonyms
- Non-taxable benefit
Related Terms
- Split Dollar Plan: A life insurance arrangement where the employee and employer share premium costs and benefits.
- Economic Benefit Regime: Taxable economic benefits received under various life insurance and annuity plans.
Frequently Asked Questions
Q: How are P.S. 58 charges calculated?
A: P.S. 58 charges are calculated based on an IRS-generated table that incorporates age, gender, and life expectancy estimates.
Q: What is the purpose of P.S. 58 charges?
A: They standardize the valuation of life insurance protection for tax purposes, ensuring fair taxation of these benefits.
Q: Do employee contributions affect P.S. 58 charges?
A: Yes, the taxable economic benefit is reduced by the amount of contributions the employee has made.
Exciting Facts
- P.S. 58 charges were one of the early attempts by the IRS to bring uniformity in life insurance benefit taxation.
- The concept plays a crucial role in complex insurance plans and financial strategies.
Quotations
“Insurance is not just a game of risk but of interpreting and implementing subtle yet critical regulations like P.S. 58 charges.” - Anonymous Insurance Expert
Proverbs and Humorous Sayings
“The IRS and insurance can turn even a split-second decision into a lifetime occupation.”
Related Government Regulations
The regulations governing the issuance and calculation of P.S. 58 charges fall under the purview of the Internal Revenue Service (IRS), with frequent updates to the actuarial tables reflecting current demographic data.
Suggested Literature and Sources
- “Fundamentals of Employee Benefit Programs” by Employee Benefit Research Institute: Comprehensive guide to understanding employee benefits.
- IRS Guidelines on P.S. 58 Charges: Official documentation from the IRS website detailing the methodology.
Quizzes
Inspired by the detailed insight into financial regulatory terms? Remember, even in the world of taxes and insurance, knowledge is your most secure policy. Fill the dartboard of your life with precise and sharp information, and always aim for the bullseye of understanding!
Cheers, J.D. Stevenson
