1. Covering a Partner Goods news, bad news 11

2. Heres why…. Good news: The IRS allows CMH to let its employees cover domestic partners Bad news: The IRS dictates less favorable tax treatment when covering partners 2

3. How is a Partner defined at CMH? 1. Sole domestic partner (same sex or opposite sex) 2. At least 18 years old 3. Not related by blood 4. Not legally married to someone else 5. You must provide proof of domestic relationship (see next slide) 3

4. How do I prove relationship? You must provide: 1. Evidence of civil union, or 2. At least three of the following: a) Joint lease, mortgage or deed b) Joint ownership of a vehicle c) Joint checking/savings bank account d) Designation of partner as beneficiary on your life insurance e) Designation of partner as beneficiary in your will f) Shared household expenses g) Partner holds power of attorney for healthcare 4

5. When is partner coverage the same as spousal coverage? 1. The coverage for a qualified partner mirrors spousal coverage for the following two items: a) Dependent life insurance b) Beneficiary 5

6. When is partner coverage different than spousal? 1. Premiums are handled differently for medical, dental and vision coverage 2. COBRA is not offered to partners 3. Partner expenses may not be submitted to your Healthcare Spending Account reimbursement 4. Partners childrens daycare expenses may not be submitted to your DCSA. 6

7. How are premiums calculated? The federal government mandates that the portion of the premium that relates to the partner cannot be taken pre-tax So, if the cost for employee only coverage is $50 biweekly and the cost for employee and family is $200 biweekly, $50 comes out pre-tax and $150 comes out after-tax 7

8. What is Imputed Income? Per the IRS: 1. If CMH pays more toward a contract because the employee is covering a partner, the employee must be taxed on that additional amount. 2. So, if CMH pays $200 biweekly toward an employee only contract and $500 biweekly toward an employee and family contract, the employee must be taxed on the additional $300 biweekly. 3. This is handled by, in effect, giving the employee a $300 taxable bonus biweekly then taking out $300 as an after tax deduction. This will increase the employees taxable earnings on the W-2 form. 8