Short answer: It can. If the employer arranges the payroll deductions and the voluntary rates charge at least one employee less than the IRS table cost and at least one more, the IRS treats the policy as carried by the employer, and coverage over $50,000 can produce imputed income.
The IRS considers an employer to carry a group life policy, even if it pays none of the cost, when it arranges for employees to pay and charges at least one employee less than, and at least one other more than, the cost of their insurance under the IRS table. This is often called the straddle rule. Age-banded voluntary rates commonly sit below the table at some ages and above it at others, which is how it happens.
When the voluntary coverage is employer-carried, the imputed income calculation looks at all the employee’s group term coverage over $50,000, basic and voluntary together, and subtracts what the employee paid. Younger employees who pay more than the table cost usually end up with nothing taxable; older employees with large elections are where an amount shows up.
Whether a given voluntary plan straddles is a calculation for the carrier, payroll vendor or tax adviser; the question is worth asking when the plan is set up.