From the Hotline: Executive Medical Reimbursement Plans and Imputed Income for Domestic Partners

Question: With respect to imputed income for domestic partners, it is our understanding that medical, dental and vision benefits would incur imputed income with respect to cost of coverage.  Would you be able to advise how this is handled if a domestic partner is also included for coverage as a dependent under an Executive Medical Reimbursement plan?

Answer: Under the federal rules, neither a domestic partner nor the dependent of a domestic partner will receive tax-favored treatment under any form of health reimbursement arrangement unless the individual is a dependent under section 152 of the IRC.  The coverage for the domestic partner must be imputed to the employee’s gross income for federal purposes.  State and local tax treatment of domestic partner benefits will vary. Consult the applicable laws and/or a tax professional for more detailed information as to how the state or local tax rules apply in your area.