A number of our clients have requested information regarding the calculation for imputed income for a domestic partner, especially if it involves a retiree. When an employee or retiree enrolls their domestic partner or their partner’s child in one of the district’s health plans, the IRS considers the district’s contribution toward the additional coverage as the employee’s imputed income. The person’s imputed income is the district’s contribution toward the additional coverage for the domestic partner and/or the partner’s child. If an employee, the amount to cover an employee’s domestic partner and/or partner’s child would be a post-tax deduction through a payroll deduction (as opposed to pre-tax for medical coverage for other enrolled family members).
Example A: If a person enrolls their domestic partner and his or her child, the imputed income would be the difference between the district’s contribution single coverage and family coverage.
Example B: If a person enrolls their domestic partner, the imputed income would be the difference between the district’s contribution for family coverage and single coverage.
A sample calculation chart is below:
Imputed income is separate from – and in addition to – a person’s monthly plan cost. Imputed income applies even if the person pays no monthly cost for their medical plan. The amount of the person’s imputed income depends upon the plan in which the employee enrolled in as well as the level of coverage.
Imputed income is taxable – that is, it increases an employee’s taxable gross income for federal and state income taxes as well as for FICA (Social Security and Medicare) and taxes are withheld from the employee’s paycheck. The employee’s imputed income is reported on the annual Form W-2. For a retiree, the income would be reported on a 1099-MISC.
Shari Diamond, CIA
Partner
Shari has been with Cerini & Associates, LLP since 2008 where she works primarily with the firm’s school district clients providing internal audit and claims audit services. She has over twenty years’ experience performing internal audits, risk assessments, and compliance reviews, as well as recommending processes to strengthen the internal controls environment while increasing efficiencies. Her prior experience at PWC and Northrop Grumman included performing Information Technology audits.
