Best Practices for Imputing Income for Domestic Partner Coverage

This article explains best practices when imputing income for Domestic Partner coverages

OVERVIEW

Domestic Partner coverage should be accounted for as imputed income in your employees' earnings. This article provides best practices for handling these earnings in preparation of your company's tax filings.

 

BEST PRACTICE

Any portion of domestic partner, post-tax contributions that are covered by an employer should be counted as imputed income for an employee. 

For example, if you offer a medical plan with domestic partner coverage, the post-tax contribution (to cover the domestic partner) is $300, and the employer contributes $100 to this post-tax amount, this means your employee receives $100 of imputed income.

Example (Fair Market Value method)
The monthly amounts are as follows:

Employee Only = $500.00
Employer Share = $400.00
Employee Share = $100.00

Employee and Domestic Partner = $1,200.00
Employer Share = $900.00
Employee Share = $300.00

Calculation
$900 - $400 = $500 (monthly)
$500 x 12 = $6,000 Annual Imputed Income

 

This amount is determined by referring to your employees' Deduction page in Namely Payroll. For plans with domestic partners, any employer post-tax contribution amounts are the amount of imputed income that needs to be reported. If you would like to validate the amounts before adding them to your payroll, please refer to your plan documents or reach out to your broker.

Once you have the amounts, add them as a recurring wage. If you have not been including this amount as an inputed income this year, you may need to enter the running Year to Date amount on your next pay cycle (to reflect the missed earnings so far this year), then adjust the amount to the correct per-pay period amount so it accrues correctly going forward.