Tax treatment for Domestic Partner Coverage

Learn about tax treatment for domestic partner coverage offered at Enjoy

This information does not constitute tax advice. Consult your tax advisor for specific guidance regarding federal, state and local income tax.

 

If you are an active employee regularly scheduled to work at least 20 hours per week, you are eligible for certain health and insurance benefit programs provided by Enjoy. You may also add eligible dependents to most of your health benefit plans. Eligible dependents generally include your legal spouse, registered domestic partner, and dependent child or children up until age 26.

 

While Enjoy allows its employees to add registered domestic partners and/or domestic partners’ children up to age 26 to the medical, dental or vision plans, the federal tax treatment of these benefits for domestic partners and domestic partner’s children is different from that of legally married individuals. Your domestic partner is generally considered to be your non-tax dependent unless he/she meets specific financial dependency criteria established by the Internal Revenue Service (IRS).

Typical Tax Consequences

Type of Dependents

 

Your Per-Paycheck Contribution

  • For your coverage

  • For your dependents’ coverage

Imputed Income

  • For your coverage

  • For your dependents’ coverage

Tax Dependents 

(Your legal spouse and/or your children)

Pre-tax
Pre-tax

Not applicable

Not applicable

Non-Tax Dependents 

(Your domestic partner and/or your domestic partner’s children)

Pre-tax
After-tax

Not applicable

Applicable

Adding Dependents to Your Health Plan

Per-Paycheck Contribution

 

The federal tax law allows employees to make pre-tax contributions for health care coverage, but only for themselves and their tax dependents such as legal spouse and dependent children. If your situation does not meet the IRS standard for pre-tax contribution, the portion of your contribution that is attributed to your domestic partner’s coverage must be deducted from your pay on an after-tax basis. 

 

Imputed Income

 

Under federal tax law, Enjoy’s contributions for health plans are excluded from an employee’s gross income. Similar to your per-paycheck contributions, federal law permits this exclusion only for coverage of the employee, the employee's legal spouse, and the employee's tax dependent children. If you add a domestic partner to your health plan who does not qualify as a tax dependent under the IRS rules, the fair market value of Enjoy’s contribution toward that coverage is considered taxable fringe benefit, subject to tax withholding. This calculated fringe benefit is known as “imputed income.” It will increase your taxable income. Therefore, your federal, Social Security and Medicare taxes will likely increase, and your net pay will decrease. 

 

Note that these rules may also apply to any State and local income taxes depending on your location.

 

Examples

 

Example #1:  Jennifer is covering her spouse for medical coverage under the Cigna EPO plan. 

Example #1 – Covering a spouse

Cigna EPO Plan

A. Coverage for Jennifer & her spouse

B. Coverage for Jennifer only

C. Coverage for her spouse (A – B)

Jennifer’s Bi-Weekly Contribution

$118

 

$51

$67

Enjoy’s Bi-Weekly Contribution

$433

 

$239

$194

Jennifer sees the following on her paycheck:

$118 pre-tax medical plan deduction (for Jennifer’s and her spouse’s coverage)

 

Imputed Income: not applicable

Example #2:  Michael is covering his domestic partner for medical coverage under the Cigna EPO plan.

Example #2 – Covering a domestic partner

Cigna EPO Plan

A. Coverage for Michael & his domestic partner

B. Coverage for Michael Only

C. Coverage for his domestic partner (A – B)

Michael’s Bi-Weekly Contribution

$118

$51

$67

Enjoy’s Bi-Weekly Contribution

$433

 

$239

$194

Michael sees the following on his paycheck:

$51 pre-tax medical plan deduction (for Michael’s coverage)

$67 after-tax medical plan deduction (for his domestic partner’s coverage)

 

Imputed Income:  $194

If you have any questions, please call the Enjoy HR team at 1-888-GO-ENJOY or email people@enjoy.com