Application of Domestic Partner Benefits


An employee’s domestic partner does not qualify as a “spouse” of the employee for purposes of the Internal Revenue Code.  This is based on the 1996 Defense of Marriage Act, which provides that “the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife”.

 Consequently, tax-favored benefits from Flexible Spending Accounts or Health Savings Accounts cannot be provided to domestic partners.  Whether or not state laws apply to self funded plans is immaterial for tax purposes.

In companies that provide health care benefits to domestic partners (whether self-funded or insured), employees are taxed on the amount by which the fair market value of health coverage for the domestic partner exceeds the amount, if any, paid after-tax by the employee for that coverage. 
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