Cafeteria Plans

[Guest Judy S]

We have a cafeteria plan sponsor that wants to include "domestic partners", both same sex and opposite sex, as eligible for coverage.

We have read the definition of dependent in 152 and it seems like a domestic partner could satisfy 152(a)(9) if he or she lives with the taxpayer and is a member of his or her household. I'm not sure how 152(B)(5) figures into the equation, however. Are such relationships in violation of local law?

Has anyone else encountered this situation?

[Guest lschaab]

In order for the employee to utilize tax free benefits for a 'partner' the 125 plan document would have to be reviewed for any specific inclusions or exclusions, and that the definition of a dependent is 152. If insurance benefits are part of the equation, the insurance company also should be contacted to determine if they accept domestic partners, and if so, amend the contract (if need be) and disclose the credentials that must accompany an application for enrollment. Many of the insurance company's in our area just haven't made the accomodation, so as an administrator it makes our argument NOT to include 'partners' a little easier. If a 'partner' satisfies the 152 requirements and provides the proper documentation to allow pre-tax payment of premiums, or submission of expenses under a FSA, we have no argument. Policing continued eligibility is difficult. Also, when it comes to the change in status rules, we have alot of issues, as you might well imagine....

Accepting domestic partners in this day and age shouldn't be as difficult a process as it is, as long as everyone understands and follows the rules and requirements, you can certainly maintain a plan that doesn't run into a jam. I suppose thats the best advice I have, based on our experience.