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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 

 

Established in 1996, The Wagner Law Group has 23 attorneys engaged exclusively in employee benefits, estate planning and employment law. Seven of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

 

 

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110


Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

San Francisco Office

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104

 

Illinois Office

Tel: (847) 250-1365

Fax: (847) 250-1367

414 West Deerpath Road
Lake Forest, IL  60045  

 

www.wagnerlawgroup.com

 

 

 

 

May 1, 2014

 

 State and Federal Law Alert

 

 

 

IRS Releases Guidance on HRA Coverage for Non-Dependent Domestic Partners 

 

 

 

IRS has issued private letter ruling (PLR 201415011) that addresses the tax consequences when an employer provides health reimbursement account ("HRA") coverage to its employees' domestic partners. In particular, this ruling addresses the tax and benefit issues that result when an HRA provides coverage to non-dependent domestic partners through a Voluntary Employee Beneficiary Association ("VEBA").

 

As a general rule, health care coverage and benefits provided to an employee and his or her dependents from an employer-sponsored medical plan are tax-exempt. However, when coverage is provided to a domestic partner who does not qualify as a dependent under the Code, the employee is subject to imputed income. A VEBA can provide domestic partner coverage as long as such coverage is "de minimis".

 

Background. The employer proposed that its HRA be amended to provide coverage to employees' domestic partners. In addition, under the proposal, the VEBA would pay any FICA, FUTA, and income tax withholding that results from the domestic partners' coverage. The payments would be made from each employee's HRA account, and would be reported on the employee's Form W-2.

 

Guidance. The IRS ruled that the fair market value of the HRA coverage provided to a domestic partner is included in the employee's gross income and considered wages for FICA, FUTA and income tax withholding purposes. The amount of employee FICA and income tax withholding that is paid by the VEBA is also included in the employee's gross income and considered wages for employment tax purposes.

 

The federal and state income and employment taxes that are incurred as a result of the HRA coverage may be paid from the employee's individual HRA account. Any employee FICA or income tax withholding payments attributable to the HRA coverage and paid from the employee's HRA must also be included in the employee's gross income and wages, and would have to be increased under the gross-up rules that apply when taxes are paid by a third party on behalf of an employee.

 

HRA benefit payments made on behalf of a non-dependent domestic partner would be excluded from the employee's and the domestic partner's gross income, as long as the fair market value of the partner's HRA coverage is included in the employee's gross income. For withholding purposes, the VEBA is considered to be the employer and is, therefore, required to withhold and report income taxes. The IRS also ruled that, because the VEBA is the employer for withholding purposes, wages paid by the employee's actual employer should be disregarded when determining the amount to be withheld.  

 

 

 

 

 

This Newsletter is protected by copyright. Material appearing herein may be reproduced with appropriate credit.

  

Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.

 

This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.