Employer paid health insurance for a domestic partner

[Earl]

I am told that the client is being told by a consultant that this taxable fringe benefit is not included in wages for the retirement plan.

Seems to me that if it is taxable to the individual and included in W-2 it would count.

Any insight on this?

Thank you!

[Peter Gulia]

So let's ask the question at least one BenefitsLink reader will raise: What does the plan document say?

Also:

Has the employer decided to tax-report a portion of the amount it paid for health coverage as the participant's wages?

Might the person described as a domestic partner also be the participant's spouse for Internal Revenue Code sections 105 and 106?

Might the person described as a domestic partner also be the participant's dependent for Internal Revenue Code sections 105 and 106?

Resolving your query might turn on the exact text of the retirement plan's provisions.

[My 2 cents]

I do not work with tax issues related to employee benefits (especially health benefits), but is it not true that the IRS has declared that benefits provided to domestic partners are taxable, end of discussion? Is it not true that the employer must report any such benefits in the employee's taxable income?

If the domestic partner is a dependent, that might be different, but then aren't they being covered as a dependent and not as a domestic partner?

[QDROphile]

The plan document has nothing to do with the income tax treatment to an employee of employer-provided health benefits to a domestic partner. Marital status and dependent status determine the tax treatment. Domestic partners are not spouses unless the state has converted registered domestic partnerships to marriage. Check out Washington -- I do not think the conversions are effective yet.

[Earl]

Thanks, that is what I was thinking. Participant is in California. I don't think DP status was changed to "married." In SF that stuff is big news and it seems I would have seen something about it.

But if the Participant is being taxed on it, it seems like it would be included in income.

HR company is not including it in listing of plan wages. I figure someone a lot smarter than me designed the system but I am not familiar with this issue.

[QDROphile]

Plans can have a safe harbor definition of compensation that excludes taxable fringe benefits. That DOES depend on plan language and I am glad to have the opportunity to clarify my statement that plan language does not matter for income tax purposes.

[Peter Gulia]

The originating query was whether "this taxable fringe benefit [providing health coverage for a domestic partner] is not included in wages for the retirement plan."

As QDROphile mentions, a retirement plan's definition of compensation, at least for benefit-accrual purposes, might involve possible variations, even within the range of safe-harbor definitions. Moreover, a plan might state a definition that is not a safe-harbor definition.