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 Aetna EPO plan.