MMC Benefits Handbook
Do I pay for my healthcare coverage with before-tax or after-tax dollars?
You pay for your coverage with before-tax dollars.
What effect does paying for coverage on a before-tax basis have on my other benefits?
None. Your annual base salary will be used to calculate all salary related benefits.
What effect does paying for coverage on a before-tax basis have on my paycheck?
Paying for coverage on a before-tax basis means that the amount you pay toward your healthcare coverage comes out of your pay before taxes are withheld, so you are paying taxes on a lower amount of salary. Your take-home pay is higher than it would be if you paid for your coverage on an after-tax basis.
What effect does paying for my coverage on a before-tax basis have on my Social Security benefit?
Your Social Security benefits may be slightly reduced because you pay for coverage on a before- tax basis. This is because your Social Security is based on your taxable pay, and your taxable pay is reduced by the amount you pay for healthcare coverage.
Are contributions for a domestic partner and child(ren) of a domestic partner made on a before-tax basis?
Your contribution to cover a domestic partner and the dependent child(ren) of a domestic partner is the same as the cost to cover other eligible family members. The contributions are made on a before-tax basis. However, because of IRS requirements, the total cost (Company's cost plus your contributions) for providing healthcare will be imputed as taxable income to you unless your domestic partner (or his or her child(ren)) qualifies as your tax dependent (see "If my domestic partner qualifies as a tax dependent, how can I have imputed income stopped?").
What is imputed income and why am I taxed on it for domestic partner coverage?
Under current tax laws, the total cost (Company's cost plus your contributions) for providing healthcare coverage to domestic partners results in "imputed income" to you; you must pay tax on this income. The full cost of domestic partner coverage (Company's cost plus your contributions) is subject to federal income, FICA (Social Security and Medicare) and, if applicable, state and local income taxes.
Your amount of imputed income equals the full cost to cover your partner (and/or partner's child(ren)). The dollar amount of imputed income is calculated every payroll cycle and is reflected on your payslip and is subject to tax withholding under federal, and, if applicable, state and local law. It is also reported on your year-end W-2 Form as a component of taxable income from the Company.
Tables in each of the sections describing an affected healthcare plan show the imputed income amounts.
If your domestic partner (or his or her child(ren)) qualifies as a dependent under Internal Revenue Code Section 152 and IRS Publication 501 (that is, are your tax dependents), imputed income does not apply (see "If my domestic partner qualifies as a tax dependent, how can I have imputed income stopped?").
If my domestic partner qualifies as a tax dependent, how can I have imputed income stopped?
You must complete the Declaration of Domestic Partner's Tax Status form and return it as the form instructs. You can obtain a form by going to Colleague Connect (https://mmcglobal.sharepoint.com/sites/home). Click Pay & Benefits, under Find a document, select Search all documents. You will be notified if additional information is required or if you qualify.