Domestic Partner Benefits

Domestic Partner Benefits

Many employers provide health insurance coverage to the domestic partners of their employees. Domestic partner benefits generally include medical and dental insurance, but they may also include disability and life insurance, family and bereavement leave, education and tuition assistance, relocation and travel expenses, and inclusion of partners in company events.

Since same-sex marriage is now legal in every state, some employers are dropping their domestic partner benefits and requiring that couples get married in order to qualify for employee benefits. However, some employers—especially those that offer same-sex and opposite-sex domestic partner benefits—are continuing to provide domestic partner benefits for a variety of reasons.

Employers that decide to drop their domestic partner benefits should consider providing a grace period before the change takes effect in order to allow domestic partners time to marry or to make other benefits arrangements.

Reasons for Offering Domestic Partner Benefits

Companies offer domestic partner benefits for many reasons. Some of the most commonly cited reasons for providing domestic partner benefits include:

  • Hiring and retentionDomestic partner benefits can have a positive impact on attracting and retaining top talent by recognizing that some people need health benefits for their partners, but prefer not to marry.
  • Improved employee productivity—One purpose of a benefits program is to provide a safety net for employees and their families, thereby allowing them to better focus on work. Employee morale and productivity improve in environments where employees believe that the employer values them. Offering domestic partner benefits is a way for employers to adapt to the changing needs of their employees by expanding the eligibility of existing benefits programs.
  • Union demands—Companies may offer benefits as a result of collective bargaining in which an employee union has determined that a majority of the employees request domestic partner benefits.
  • Ethical concern for others—Many employers offer domestic partner benefits for ethical reasons, like to allow non-married couples to have the same rights as married ones.

State law requirements—Some states, such as California, have laws that require health insurance coverage for domestic partners.

Reasons for Not Offering Domestic Partner Benefits

Companies choose not to offer (or to eliminate) domestic partner benefits for many reasons. Some of the most commonly cited reasons for not providing domestic partner benefits include:

  • Availability of same-sex marriage—Some employers offered same-sex domestic partner benefits because employees did not have the option to legally wed their same-sex partners. Because same-sex marriage is now legal in all 50 states, some employers have decided to require employees to marry their domestic partners within a certain timeframe or risk losing their partners’ health insurance coverage.
  • Fraud concern—Another reason cited for not offering domestic partner benefits is the fear that employees will misrepresent their relationships to obtain benefits for individuals who are not their domestic partners. To address this concern, many employers require employees to sign a legally binding statement attesting to the existence of the partnership.
  • Adverse selection—Because domestic partner relationships do not usually have the same legal implications as marriage, employees may be more likely to enter into a domestic partnership just to obtain health benefits.
  • Tax issues—Administering domestic partner benefits can be complex. These benefits are often subject to different tax rules than benefits for spouses. For example, unless the domestic partner is a tax dependent of the employee under federal tax law, an employee will be taxed on value health benefits provided by an employer to a domestic partner. Such benefits will also have employment tax consequences for the employer.

Definition of a Domestic Partner

There are no uniform rules defining a domestic partner, and not all areas have state or local laws or regulations that define the term. Some employers choose to establish their own definitions, while others reference state or local law domestic partner registration systems. Commonly used plan requirements stipulate that domestic partners:

  • Have lived together for a specified period (generally, at least six months);
  • Share financial responsibilities;
  • Are not blood relatives;
  • Are at least 18 years of age;
  • Are mentally competent;
  • Intend that the domestic partnership be of unlimited duration;
  • Register as domestic partners if there is a local domestic partner registry;
  • Are not legally married to anyone or engaged in another domestic partnership; and
  • Agree to inform the company if the domestic partnership terminates.

Some plans require that affidavits affirming domestic partner status be submitted to plan administrators, and that an employee submit a “termination of domestic partnership” form if the partnership ends.

When drafting plans, employers should clearly state what benefits are available to domestic partners. They should also consider whether the plan will extend eligibility to the dependents of domestic partners. Beyond that, summary plan descriptions (SPDs) must clearly state the eligibility rules for domestic partners and the scope of the benefits provided to domestic partners.

Tax Implications

Legally married same-sex couples are entitled to the same benefits and protections under federal law as opposite-sex married couples. This rule applies only to same-sex marriages that are valid under state law. It does not affect same-sex couples in civil unions or domestic partnerships. These couples are generally ineligible for the federal benefits provided to spouses.

A domestic partner is not a legal spouse for federal tax purposes. An employer is obligated to report and withhold taxes on the fair market value (FMV) of  a domestic partner’s health coverage to the extent the coverage is paid for by the employer. This is not true for health insurance coverage for legal spouses (including same-sex spouses).

There is no clear rule on what constitutes FMV. The FMV of coverage is determined based on the amount an individual would have to pay for the particular coverage in an “arm’s-length” transaction. It does not depend on usage of the coverage or claims actually paid or the cost incurred by the employer. FMV is usually determined by calculating the difference between the cost of employee and employee-plus-one coverage or by using the plan’s applicable COBRA premium for the coverage, without the 2 percent surcharge. Also, any amount paid by the employee on an after-tax basis for the coverage should be subtracted from the FMV to determine the taxable amount.

Some employers “gross up” an employee’s salary to cover the cost of additional taxes from the imputed income of domestic partner benefits. Employers should disclose the methodology used for imputing employee income to employees. This would allow affected employees to make informed decisions about the cost of coverage and the tax consequences of providing their domestic partners with health coverage through their employers.

Domestic partner benefits may be considered non-taxable only if the domestic partner qualifies as a “dependent” under the definition of a “qualifying relative” pursuant to Internal Revenue Code (IRC) Section 152. To qualify as a dependent, the domestic partner must have the same primary address as the employee/taxpayer for the year and be a member of the employee/taxpayer’s household. In addition, the domestic partner must receive more than half of his or her support for the year from the employee/taxpayer. Traditionally, plans ask that the employee certify the following: that the domestic partner is the employee’s tax dependent as of the date that the annual enrollment form is completed; and that the employee expects that the domestic partner will continue to be the employee’s tax dependent for the upcoming year.

If an employee’s domestic partner qualifies as a tax dependent, the value of the health coverage and benefits paid under the health plan are tax-free to the employee and domestic partner.  A domestic partner does not have to be claimed as a “dependent” on the employee’s federal tax return in order to be eligible for tax-free health coverage. Furthermore, a domestic partner’s child is unlikely to be the employee’s dependent because, in most cases, the child will be the qualifying child of another taxpayer, such as the domestic partner or the child’s other parent.

Legal Considerations

Some states have laws that address domestic partner benefits, such as laws requiring that any employer that provides health insurance benefits to employees’ spouses must offer the same benefits to domestic partners of employees. States may also have laws that allow employees to take job-protected leaves to care for their domestic partners. Employers should stay up to date with applicable state laws impacting domestic partner benefits.

The Employee Retirement Income Security Act of 1974 (ERISA) and the IRC are federal laws that are directly applicable to domestic partner benefits. ERISA governs private sector, employer-sponsored welfare and retirement plans. ERISA generally preempts state laws that relate to employee benefit plans but not state laws that regulate insurance. As such, state insurance law may require coverage of domestic partners in plans that are otherwise regulated by ERISA. However, a fully insured health plan may be treated differently than a self-insured health plan.

The following paragraphs discuss federal employee benefit provisions as they relate to domestic partner benefits:

Flexible Spending Accounts (FSA)

Money contributed on a pretax basis to an FSA can be used to pay for medical expenses not covered by health insurance. Unless a domestic partner qualifies as a tax dependent under the IRS definition, an FSA cannot be used to cover the medical expenses of a domestic partner, even if the employer offers domestic partner health insurance benefits.

Health Savings Accounts (HSA)

Medical expenses incurred by, or on behalf of, a domestic partner are ineligible for tax-free reimbursement from an HSA unless the domestic partner qualifies as a tax dependent.

Group-term Life Insurance

Group-term life insurance on an employee is excludable from income, up to a certain limit. This exclusion does not apply to group-term life insurance for a spouse, another family member or any other person. In terms of this exclusion, domestic partners are treated no differently than spouses.

Specifically, domestic partners cannot obtain group-term life insurance in an employer’s group insurance plan on a tax-advantaged basis. Domestic partners can, however, be named as a beneficiary of life insurance purchased by an employee (his or her domestic partner) or by an employer for the employee to the same extent as legal spouse.

 

HIPAA

Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), special enrollment rights apply when employees gain new dependents or when dependents lose coverage. The extent to which domestic partners are eligible for special enrollment depends in large part on the particular health plan’s eligibility rules. However, HIPAA special enrollment rights are not triggered when an employee acquires a domestic partner.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1995 (COBRA) requires that a group health plan provide continuation of coverage when certain triggering events cause an employee, the employee’s spouse and/or a dependent child to lose coverage under the plan terms. COBRA-triggering events may include termination of employment, divorce or a dependent no longer qualifying as a dependent under the plan terms. Domestic partners cannot qualify as “spouses” for COBRA purposes and do not have their own COBRA election rights.

Even though an employee’s domestic partner has no independent COBRA rights in the instance of a qualifying event, an employer may choose to extend comparable benefits with the approval of the insurance carrier or HMO. If the former employee elects and pays for COBRA coverage in a timely way, he or she can add the domestic partner to the plan during an open enrollment period. The domestic partner’s plan coverage will end when the former employee’s COBRA coverage ends. If the domestic partner’s children are covered as dependents under the plan, they will be qualified beneficiaries in connection with any COBRA qualifying event.

FMLA

The Family and Medical Leave Act of 1993 (FMLA) is a federal policy designed to offer leave annually for certain family or medical reasons. A domestic partner is not considered a spouse for FMLA leave purposes, even if the partner qualifies as a tax dependent. Though many do, an employer is not legally required to extend family and medical leave to an employee to care for a domestic partner.

Also, the Department of Labor (DOL) has recognized the eligibility of same-sex partners, whether married or not, to take FMLA leave to care for a partner’s child, provided that they meet the in loco parentis requirement of providing day-to-day care or financial support for the child.

Conclusion

Employers need to be aware of the complicated benefits, employment and tax issues that accompany domestic partner benefits. Before extending benefits to domestic partners, an employer should determine the status of the domestic partner rules in each state in which it operates. Understanding the needs and changing nature of your workforce will make it easier to decide whether to offer domestic partner benefits.

ACA DEADLINE DELAYED

Furnishing Deadline Delayed for 2017 ACA Reporting

OVERVIEW

On Dec. 22, 2017, the Internal Revenue Service (IRS) issued Notice 2018-06 to:

• Extend the due date for furnishing forms under Sections 6055 and 6056 for 2017 for 30 days, from Jan. 31, 2018, to March 2, 2018
• Extend good-faith transition relief from penalties related to 2017 information reporting under Sections 6055 and 6056.
Notice 2018-06 does not extend the due date for filing forms with the IRS for 2017. The due date for filing with the IRS under Sections 6055 and 6056 remains Feb. 28, 2018 (April 2, 2018, if filing electronically).

ACTION STEPS

The IRS is encouraging reporting entities to furnish statements as soon as they are able. No request or other documentation is required to take advantage of the extended deadline.

Section 6055 and 6056 Reporting
Sections 6055 and 6056 were added to the Internal Revenue Code (Code) by the Affordable Care Act (ACA).

• Section 6055 applies to providers of minimum essential coverage (MEC), such as health insurance issuers and employers with self-insured health plans. These entities will generally use Forms 1094-B and 1095-B to report information about the coverage they provided during the previous year.

Section 6056 applies to applicable large employers (ALEs)—generally, those employers with 50 or more full-time employees, including full-time equivalents, in the previous year. ALEs will use Forms 1094-C and 1095-C to report information relating to the health coverage that they offer (or do not offer) to their full-time employees

Extended Furnishing Deadline

The IRS has again determined that some employers, insurers and other providers of MEC need additional time to gather and analyze the information and prepare the 2017 Forms 1095-B and 1095-C to be furnished to individuals. Therefore, Notice 2018-06 provides an additional 30 days for furnishing the 2017 Form 1095-B and Form 1095-C, extending the due date from Jan. 31, 2018, to March 2, 2018.

Despite the delay, employers and other coverage providers are encouraged to furnish 2017 statements to individuals as soon as they are able.

Filers are not required to submit any request or other documentation to the IRS to take advantage of the extended furnishing due date provided by Notice 2018-06. Because this extended furnishing deadline applies automatically to all reporting entities, the IRS will not grant additional extensions of time of up to 30 days to furnish Forms 1095-B and 1095-C. As a result, the IRS will not formally respond to any requests that have already been submitted for 30-day extensions of time to furnish statements for 2017.

Impact on Filing Deadline

The IRS has determined that there is no need for additional time for employers, insurers and other providers of MEC to file 2017 forms with the IRS. Therefore, Notice 2018-06 does not extend the due date for filing Forms 1094-B, 1095-B, 1094-C or 1095-C with the IRS for 2017. This due date remains:

  • February 28, 2018, if filing on paper; or
  • April 2, 2018, if filing electronically (since March 31, 2018, is a Saturday).

Because the due dates are unchanged, potential automatic extensions of time for filing information returns are still available under the normal rules by submitting a Form 8809. The notice also does not affect the rules regarding additional extensions of time to file under certain hardship conditions.

Filers are not required to submit a request or other documentation to the IRS to take advantage of the extended furnishing due date provided by Notice 2018-06.

Employers or other coverage providers that do not meet the due dates for filing and furnishing (as extended under the rules described above) under Sections 6055 and 6056 are subject to penalties under Section 6722 or Section 6721 for failure to furnish and file on time. However, employers and other coverage providers that do not meet the relevant due dates should still furnish and file. The IRS will take this into consideration when determining whether to abate penalties for reasonable cause.

Impact on Individuals

Because of the extended furnishing deadline, some individual taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2017 tax returns. Taxpayers may rely on other information received from their employer or other coverage provider for purposes of filing their returns, including determining eligibility for an Exchange subsidy and confirming that they had MEC for purposes of the individual mandate.

Taxpayers do not need to wait to receive Forms 1095-B and 1095-C before filing their 2017 returns. In addition, individuals do not need to send the information they relied upon to the IRS when filing their returns, but should keep it with their tax records.

Extension of Good-faith Transition Relief from Penalties for 2017

Notice 2018-06 also extends transition relief from penalties for providing incorrect or incomplete information to reporting entities that can show that they have made good-faith efforts to comply with the Sections 6055 and 6056 reporting requirements for 2017 (both for furnishing to individuals and for filing with the IRS).

This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. No relief is provided for reporting entities that:

  • Do not make a good-faith effort to comply with the regulations; or
  • Fail to file an information return or furnish a statement by the due dates (as extended).

In determining good faith, the IRS will take into account whether a reporting entity made reasonable efforts to prepare for reporting the required information to the IRS and furnishing it to individuals (such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the IRS or testing its ability to transmit information to the IRS). The IRS will also take into account the extent to which the reporting entity is taking steps to ensure that it will be able to comply with the reporting requirements for 2018.

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What is an HSA?

What is an HSA?

This 90-second video breaks down how a health savings account (HSA) works and why employees should consider one.

If you have questions about HSA’s or anything relating to employee benefit programs, please contact us using the form below.

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5 Child Care Initiatives to Enhance Your Workplace

5 Child Care Initiatives to Enhance Your Workplace

By GBS Team

The incentives you offer can impact how candidates view your company and its culture. Different programs and benefits will attract different people. Keep this in mind when choosing which initiatives to promote, especially if you want to attract working parents.

The cost of child care in the United States can be the greatest single expense for a household, with at-home care averaging $28,354 annually. Imagine, then, how enticing child care initiatives might be to working parents or those who want to start families.

Moreover, a company’s child care initiatives can make or break an employee’s decision to stay with his or her employer, according to the Harvard Business Review. Offering child care benefits is one of the best ways to recruit talent. Child care services and the support of an employer are consistently cited as top concerns for parents. The following initiatives are just some of the ways to enhance your workplace for employees and their families.

1.     Paid Time Off (PTO) and Flexible Scheduling

PTO is often used to attract talent, especially millennials. However, it can also be pitched as a family friendly benefit to working parents. Parents need time off for things like children’s doctor appointments, unexpected illnesses or family vacations. Offering generous PTO or flexible scheduling benefits makes juggling work and home life much easier for families.

2.     On-site Child Care

This option may be expensive and would require considerable buy-in from the company. However, it addresses many concerns shared by working parents and could be the “make or break” retention benefit for your workforce.

Furthermore, a study in the Journal of Managerial Psychology found that employees performed better and came to work more regularly when using on-site child care, compared against those who use off-site care or did not have children. Similarly, in a survey from Bright Horizons, an employer-sponsored child care provider, 90 percent of employees who use on-site child care reported increased concentration on their job duties.

1.     Child Care Referrals

If offering on-site child care is too expensive, consider offering resources to help employees find the best child care options for their families. Any working parent knows the stress involved in finding suitable care for their children during the workday. Consider establishing a resource network with your employees who use off-site child care. Gather recommendations and information about child care providers nearby and make those resources available to employees.

2.     Child Care Subsidies

Another way to entice working parents is by offering to pay a portion of off-site child care costs. As was stated previously, child care may be the largest single expense for a family in the United States. Offering a child care subsidy might tip the scale in your favor when employees are weighing career options, particularly for working parents.

3.     Employee Assistance Programs

Many working parents have questions about how to balance their expenses or manage emotional stress, especially if they just had their first child. With this in mind, consider offering counseling programs for your employees through an employee assistance program (EAP). An EAP can help alleviate stress that affects workplace performance.

You can choose the right EAP vendor for your organization’s needs and tailor the program to your workforce. Beyond financial counseling, EAPs can cover areas like adoption assistance, elder care referrals and basic legal help. An EAP is usually paid for entirely by the employer and is offered to employees’ immediate family members as well.

The initiatives listed in this article are by no means exhaustive. There are other ways to attract and retain working parents, but these are good places to start. Remember, the programs you establish today can help retain your employees tomorrow. Speak with Group Benefits Strategies to discuss potential options for your organization.

Health-Related Productivity Costs

GBS Benefits Insights

Health-related Productivity Costs
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$226 Billion Dollars Annually

According to Rutgers University, employee health problems cost employers approximately $226 billion each year. Of these substantial costs, approximately 70 percent resulted from a reduction in productivity, with the rest coming from work absences due to illness. While offering health coverage and benefits for employees and dependents is a major business expense, lost productivity due to physical and emotional health problems can be far more costly for employers.

Lost productivity is classified in two ways: presenteeism and absenteeism. While absenteeism means that the employee is physically not at work, presenteeism is when an employee is physically at work but a physical or mental health condition negatively affects their work quality and quantity. Employers spend two to three dollars on medical-related productivity costs (presenteeism) for every dollar spent on pharmacy and health care costs.

The AdvancePCS Center

The AdvancePCS Center for Work and Health conducted a study of 29,000 employees in the United States to determine how many hours and dollars were spent on lost productivity. The study revealed that 71 percent of lost productivity time was directly related to deficient performance on the job, while only 23 percent was due to actual absences from work. The remaining 6 percent of productivity costs were found to be associated with family health obligations. In addition, smokers who smoke at least one pack per day had productivity losses double that of their nonsmoking counterparts.

Effects of Presenteeism

Presenteeism can have many negative effects on your workforce, including:

  • Spending unneeded additional time on tasks
  • Decreased quality of work
  • Lack of initiative
  • Infecting other employees, clients or customers with an illness
  • Lowered ability to perform at a high level
  • Decreased quantity of work completed
  • Inability to be social with co-workers
  • Lack of motivation

Causes of Health-Related Productivity Costs

  • Back and neck pain (notoriously a very expensive and prevalent medical condition)
  • Headaches
  • Colds and the flu
  • Sinus trouble
  • Obesity
  • Allergies
  • Diabetes
  • Depression and/or anxiety
  • Ongoing chronic conditions

Decreasing Health-related Productivity Costs

To reduce productivity costs in your workplace, consider the following:

  • Address conditions that affect many individuals of your employee population in your wellness initiatives.
  • Offer health fairs, screenings and health risk assessments to evaluate the needs of employees.
  • Integrate your health benefit strategies with your health management and wellness initiatives.
  • Design your benefits package to support the behaviors that you want to see at your organization.
  • Partner with a health care company that takes an innovative approach to wellness and offers productivity, wellness and disease management resources. Your health care company could offer the following:
    • 24/7 nurse line
    • Wellness and health risk assessment tools
    • Lifestyle management and chronic condition assistance
    • Solutions that empower individual employees to take control of their health care

Negative Results

If you do not address your employees’ health care needs, your workplace is far more likely to experience the negative effects of both absenteeism and presenteeism. However, if you can commit time and funds to help your employees get and stay healthy, you will reduce medical and pharmacy costs and increase worker productivity.

For more information, contact Group Benefits Strategies concerning how to execute an effective wellness plan.