domestic partner benefits

kathyM · August 2006

A company in PA is looking to hire an employee with a domestic partner (not sure at this point if it is same sex or not). Their health insurance carrier will allow them to cover the employee and partner. The firm will pay $800/month for their coverage as opposed to $350 for a single employee. The firm is only charging the employee $17.50/month for this increased benefit of group coverage. Is any of this a taxable event for the employee or their partner? My guess is no. The employee provides more than half of the support of the partner and they have lived together for more than 1 year. Therefore, they are considered a valid domestic partner and benefits are non-taxable to both as long as the carrier offers the coverage. Am I correct?

irenesmsaclaims · August 2006

The employer contribution wouldn't be taxed, just as any traditional spouse employer contribution wouldn't be taxed. The only taxable event with health and welfare benefits I know of is the imputed income with certain amounts of employer-paid life insurance (over $50K if that hasn't changed) and certain HSA contributions not used for medical purposes.

NaeNae55 · September 2006

If the insurance is part of a Section 125 arrangement there could be tax issues. It depends on how the plan is written and what the state laws are regarding domestic partners. If we assume it is part of a Section 125 plan and that it includes spouses, then the following applies:

If the state recognizes the partner as a legal spouse, then all of the employee paid portion of the premium can be taken out of his check on a pre-tax basis. If the state does NOT recognize the parter as a legal spouse, then the employee's portion of the premium is split. What the employee would have paid as a premium as a single can be deducted on a pre-tax basis. The balance of his premium will be deducted on an after-tax basis.

The employer portion of health premiums are still considered 'de minis' as far as I know, and are not taxable benefits to the employee.

Good luck!

Nae

kathyM · September 2006

Thank you. I came to the same conclusion. PA does not recognize the spouse in this situation as those involved do not conform to the state requirements of a spouse. My next concern involves the insurance coverage. What will the insurance company require of the employer if there is a substantial claim from the domestic partner? How do you keep track of who is still a partner and who is not but still covered? I have discovered that the burden falls on the employer to police this. Interesting.

NaeNae55 · September 2006

I would go back to your health policy and read what the company requires for domestic partners. If you still aren't clear, call the company or your broker. They should be able to set the record straight.

I guess we are lucky. In my state we require the employee to notify us within 30 days. If they do not, then they have no coverage for their dependent (basic HIPAA law and nothing more).

My state recognizes male/female domestic partners, but not same sex partners. If an employee wants coverage for their live-in (opposite sex) partner, they must sign a common-law marriage form. Of course, this also means they must get a divorce when they split up. Most don't bother and decide to just forget the insurance.

As far as I know, no one has challenged the same sex portion here in Kansas. That might be because we also have the Westboro Baptist Church (Fred Phelps and his family). If you don't recognize the name, you might Google them. I am reluctant to say more in such a public place.

I will say though, that our city council has been trying to come up with a letter to send to every city that Mr. Phelps visits to tell them that this specific church does not speak for everyone who lives here.

Good luck!

Nae

domestic partner benefits

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