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STATE OF CONNECTICUT |
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NANCY WYMAN
COMPTROLLER |
OFFICE OF
THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775 |
MARK OJAKIAN
DEPUTY COMPTROLLER |
COMPTROLLER'S MEMORANDUM 2009 - 03
February 20, 2009
TO THE HEADS OF ALL STATE AGENCIES
ATTENTION: |
Personnel and Payroll Officers |
SUBJECT: |
State Employee Health Plan - Fair Market Value for
Same-Sex Marriage, Civil Unions and Domestic Partner Benefits |
I) INTRODUCTION
- The Internal Revenue Service recently provided clarification regarding
the tax treatment of dependents and other individuals who may be eligible
for coverage in the State Employee Health Plan under the Internal Revenue
Code and the regulations promulgated thereunder. The Office of the State
Comptroller employed this treatment in establishing the rules for
determining the Fair Market Value (FMV) of non-qualified dependents under
Public Act 08-147 (see
Comptroller's Memorandum 2008-35A). This Memorandum explains how the FMV
will be implemented under the State of Connecticut Employee Health Plan for
Same-Sex Marriage and Civil Unions effective January 1, 2009. FMV with
regard to Domestic Partners arrangements will be addressed in a separate
section later in this Memorandum.
II) DISCUSSION
- A. Same Sex marriages and Civil Union Partnerships
- The State of Connecticut permits same-sex couples to enter into marriage
or civil unions, which includes favorable treatment under state tax law.
Federal tax laws do not recognize these relationships, therefore, the
federal tax treatment of a same sex spouse or civil union partner differs
from the state tax treatment.
- When an employer provides health insurance coverage to a non-qualifying
same-sex spouse or civil union partner the federal government requires that
the employer include the Fair Market Value (FMV) of that benefit in the
employee's wages. The FMV is subject to federal income and payroll taxes
such as FICA, and will be reported as income on the employee's W-2.
Accordingly, additional taxes must be deducted from the paycheck of each
employee based on FMV of the health benefits.
- For retired employees who have a non-qualifying same-sex spouse, civil
union partner or Domestic Partner enrolled in health insurance, the FMV will
be added to their 1099R. The retiree may request that the Retirement
Services Division adjust the amount of tax withholding from their retirement
check. Retired employees with questions on these issues should be referred
to the Retirement Health Insurance Unit at (860) 702-3533.
- The Office of the State Comptroller does not provide tax advice to
individual employees or retirees. Employees with questions as to the tax
impact of the inclusion of the Fair Market Value of health benefits should
be advised to consult their personal tax advisor. The Fair Market Value
of the health plans for 2008-2009 are shown in Table II of the
Attachment.
- The process for enrolling a same-sex spouse or civil union partner has
not changed. The employee submits the appropriate documentation to their
agency personnel/payroll office. The Agency forwards the supporting
documentation along with a cover memo to the Healthcare Policy & Benefit
Services Division's Central Benefits Unit.
- B. Domestic Partnerships
- When an employer provides health insurance coverage to a non-qualifying
Domestic Partner both the state and federal government requires that the
employer include the Fair Market Value (FMV) of that benefit in the
employee's wages. Domestic Partner relationships do not receive preferential
treatment under federal or state tax law. Therefore FMV for Domestic
Partners is subject not only to all federal income and payroll taxes but
also all applicable state income and payroll taxes. In short, the FMV of the
health benefit will be reported as wage income on the employee's W-2 and
will be taxed accordingly under both federal and state tax law.
Please be reminded that while same sex domestic partners and eligible
dependent children of the domestic partner are currently eligible for
coverage under the State's health benefit plan, this benefit will end
effective November 30, 2009. Additional information regarding Domestic
Partner benefits is provided in the Retirement & Benefit Services Division's
Memorandum dated
November 26, 2008.
IV) CONCLUSION
- Agency personnel and payroll representatives with questions may contact
the Central Benefits Unit by email
osc.benefitcorrections@po.state.ct.us , or at (860) 702-3535. Please do
not refer employees or retirees to this number, as all calls from individual
employees will be referred back to the employing agency.
Very truly yours,
Nancy Wyman
State Comptroller
NW:TW
Attachment
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