Department of Civil Service

PA95-02

TO: Health Benefits Administrators
FROM: Employee Benefits Division
SUBJECT: Domestic Partner Coverage
DATE: January 27, 1995

New York State has reached agreement with representatives of all bargaining units to extend health care coverage to domestic partners of State employees. This benefit has also been extended to non-represented State employees and is being offered, on an optional basis, to Participating Agencies.

Employers that elect to extend this benefit must provide it for active employees, vestees and retirees. Employers that contemplate providing this benefit should seek expert tax advice so that they are fully aware of the tax implications and reporting requirements for both employers and employees.

This memorandum will explain who can be enrolled in the New York State Health Insurance Program (NYSHIP) as a domestic partner, how to process the enrollment and when coverage will be effective. Updated Health Benefit Administrator (HBA) manual pages will follow shortly. Your active and retired employees will receive an Empire Plan Report at their home address in early February. The report will explain that Participating Agencies may offer the benefit and that enrollees should check with their agency.

The affidavits and instructions for enrollees are attached to this memorandum. Participating Agencies that elect to offer this benefit must use the State-established eligibility rules and the attached application forms and procedures. Please review these documents carefully because they contain additional information. If you choose to extend this benefit, you should make copies of these documents to give to each enrollee who requests coverage for a domestic partner.

What is a Domestic Partner?

Pursuant to language in the agreements between the State and the unions for NYSHIP eligibility purposes, a domestic partnership is one in which both partners are: 18 years of age or older; unmarried and not related by marriage or blood in a way that would bar marriage; residing together; involved in a committed (lifetime) rather than casual relationship, and mutually interdependent financially. The partners must be each other's sole domestic partner and must have been involved in the domestic partnership for a period of not less than six (6) months. They must be able to document all of these criteria for the enrollment to be permitted.

Enrolling a Domestic Partner

If your agency elects to offer this benefit, notify the Employee Benefits Division (EBD) by completing the attached election form and sending it to the PA Unit at EBD before the earliest desired effective date.

To begin the enrollment process, give the employee the domestic partner enrollment package. This includes the instructions, Affidavit of Domestic Partnership, Affidavit of Financial Interdependence, Dependent Tax Affidavit, Termination of Domestic Partnership Form and a Health Insurance Transaction Form (PS-503.1). Completed documents should be returned to the Health Benefits Administrator (H BA) along with two items of proof of financial interdependence and proof of six month residency. The Affidavit of Financial Interdependence includes a list of acceptable proofs.

If these documents are properly submitted and the proofs provided are obviously acceptable (clearly on the list), the HBA should continue with the enrollment procedure described below. If the HBA is unsure if the partner is eligible for coverage (one or more proofs are not clearly identifiable as being on the list), the HBA should contact the Program Services Unit at the Employee Benefits Division for a determination of eligibility.

The HBA should never accept or agree to hold an incomplete application package, nor should a transaction be completed based on an incomplete application package.

Once eligibility has been established, the HBA will submit the PS- 503.1 to Blue Cross and send a copy of the PS-503.1 and affidavits to the Employee Benefits Division, Attention: PA Unit. The HBA should file the copy of the PS-503.1 and original affidavits, along with copies of the proofs submitted, in the employee's file at the agency.

Effective Date of Coverage

The earliest date that coverage can be effective is February 1, 1995. An employer may establish a special one or two month initial enrollment period when the benefit is made available. Anyone who submits a complete and acceptable application during that open enrollment period may have coverage for their domestic partner effective on the first day of the following month.

After the initial enrollment period, the same effective date rules used for changes due to marriage must apply. The date of first eligibility will be six months after the latest date on the documents of proof that are submitted with the application. Additional instructions for verifying eligibility and duration of relationships will follow with enrollment instructions.

Imputed Income

Because domestic partners are usually not recognized as dependents by the State and federal tax authorities, covering a domestic partner will almost always result in additional taxable income. Internal Revenue Service (IRS) rules require the fair market value of the coverage provided to the domestic partner to be considered imputed income to the employee and reported on the employee's W-2 form. The fair market value of State-administered benefits equals the "gross" (before application of interest and dividend) individual premium less the employee's contribution for dependent coverage, if any. The gross monthly premiums for individual Empire Plan coverage are as follows:

The monthly imputed income is the above amount for the appropriate option less the difference between the amount paid, by the enrollee, for family and individual coverage.

If an employer makes other benefits available to domestic partners, the value of those benefits may also generate imputed income to the employee. Employers' who offer other benefits are cautioned to consult with their financial advisors or counsel for a full discussion of the tax implications.

Imputed Income Exception

EBD has been advised that if a domestic partner qualifies as a dependent under IRS Code Section 152 (copy enclosed with application package), there is no imputed income for the employee and none should be reported to the IRS if the dependent tax affidavit in the enrollment package is submitted by the employee at the time of application. Employees should be required to review the IRS dependent status of the partner annually. EBD has been advised that if an employer adopts this procedure, mid-year adjustments need not be made to imputed income, payroll tax withholding and FICA contributions based on the partner's gain or loss of IRS dependent status; however, you should consult your agency counsel for confirmation of this. If the partner loses IRS dependent status mid-year, the employee will be responsible for reporting and paying taxes on the value of coverage provided to the partner for the entire year with that year's income tax return.

Pre/Post-Tax Deductions

EBD has been advised that IRS rules mandate that an employee who enrolls a domestic partner must pay the additional employee contribution for dependent coverage on a post-tax basis although the individual premium can remain pre-tax. Employees who currently have pre-tax individual coverage, must have a post-tax deduction for the additional premium for dependent coverage. Employees who already have family coverage on a pre-tax basis, must have their deductions split into pre- and post-tax components to meet IRS requirements.

Terminating Domestic Partner Coverage

When a domestic partner relationship ends, the employee must fill out and sign the Termination of Domestic Partnership Form within 14 days of the termination. This form is part of the enrollment package and should be given to each enrollee who applies for this benefit. The employee will not be eligible to enroll another domestic partner or re-enroll the same partner until 6 months after the Termination of Domestic Partnership Form is submitted to the HBA.

An employee may delete a partner from health insurance coverage at any time, even if the relationship is not terminated. Those deletions will be effective in accordance with current plan rules.

Other Information

Eligibility for NYSHIP coverage of children of domestic partners will continue to be based on the Program's eligibility criteria for "other children". Note that these criteria assess the child's dependent status with respect to the enrollee and should be separate from the eligibility of the domestic partner.

Domestic partners who survive a deceased employee will be eligible for dependent survivor coverage under the same circumstances as surviving spouses.

EBD has been advised that employers are not required to provide COBRA coverage to a domestic partner who loses eligibility. New York State has chosen to provide COBRA coverage to such individuals. Participating Agencies may determine if they wish to provide this benefit. For PA's that offer COBRA continuation, domestic partners who lose coverage eligibility will have 60 days following their loss of coverage in which to elect COBRA continuation. The 60 day application period begins on the day eligibility is lost, not the day the termination form is filed, so employees should be advised to file termination notices promptly.

Retirees and vestees must be permitted to enroll domestic partners should the agency elect to provide the coverage for active enrollees.

More detailed information on coverage for Domestic Partners and instructions for processing all transactions for domestic partners will follow shortly.

EMPLOYEE BENEFITS DIVISION
INSTRUCTIONS FOR ENROLLING DOMESTIC PARTNERS IN THE NEW YORK STATE HEALTH INSURANCE PROGRAM

Participating Agencies/Employers in the New York State Health Insurance Program (NYSHIP) may now extend Empire Plan coverage to the domestic partners of their enrollees. Your employer has elected to provide this benefit effective________________________________.

To determine if your domestic partner (partner) qualifies for enrollment, carefully read these instructions and the attached information on the eligibility requirements, the affidavits you both must sign, the proof you must submit, the enrollment application, and important tax information you should know.

The affidavits and documents you are required to submit are only intended to establish the eligibility of your domestic partner for benefits available to you as a NYSHIP enrollee. However, it is recommended that you seek advice from your attorney regarding any possible legal and financial implications before you take the actions required to provide this benefit coverage to a domestic partner.

Who can be covered as a domestic partner

Unmarried enrollees may cover same or opposite sex partners with whom they reside and have a committed, long term relationship of mutual support, and for whom they have assumed long term financial responsibility or have mutual financial responsibility. See the Aflidavit of Domestic Partnership for details. Persons who live together for economic reasons, but who have not made a commitment to an exclusive enduring domestic partnership as described in these documents, will not be considered to be domestic partners for the purposes of enrollment in NYSHIP.

How to enroll a domestic partner

You must do four things. First, you and your partner must complete the Affidavit of Domestic Partnership. Second, you and your partner must complete the Affidavit of Financial Interdependence. Third, you must complete a PS 503.1 Health Insurance Transaction form. Fourth, you must submit these documents along with two items of proof of financial interdependence and proof of residence for both partners to your Health Benefits Administrator. In addition to the above, if your partner qualifies as your dependent for federal tax purposes and you wish to avoid the additional taxes that may result from this benefit (see Income Tax Implications), you must also complete the Dependent Tax Affidavit and return it with the other documents. Applications filed without the required affidavits or proof, will not be processed. Ambiguity or lack of clarity will not be interpreted in the employee's/partner's favor.

When coverage begins

Your employer may establish a special enrollment period when this benefit is initially extended. If you are already enrolled in NYSHIP, apply during the special enrollment period, and have satisfied the six month residency and financial requirements, coverage for your partner begins on the first day of the month following the month in which you have submitted all required documentation to your Health Benefits Administrator.

After the special enrollment period, if you are enrolled in NYSHIP, have satisfied the six month residency and financial requirements, and you have submitted all required documentation to your Health Benefits Administrator prior to your partner's date of first eligibility, the coverage for your partner begins on the date of first eligibility. If you apply within one month after the date of first eligibility, coverage for your partner begins on the first day of the month following the month in which you have submitted all required documentation to your Health Benefits Administrator. If you apply more than one month after the date of first eligibility, you will be subject to a late enrollment period and coverage for your partner will begin on the first day of the third month following the month in which you apply. Your partner's date of first eligibility is the day that is exactly six months later than the latest date on the supporting documents submitted with your application for coverage.

If you are not enrolled in NYSHIP, coverage for both you and your partner may be deferred until you satisfy the new employee or late enrollment waiting period. Ask your Health Benefits Administrator if you must satisfy a waiting period.

When coverage ends

Coverage for your partner will end on the day on which you and/or your partner no longer meet one or more of the requirements on the two affidavits you both have signed. The terms and conditions of your coverage require you to report this relationship termination within 14 days of its occurrence.

How to report that the partnership has ended

Within 14 days of the date the partnership ends, you must complete and submit the form "Termination of Domestic Partnership". The form is available from your Health Benefits Administrator and must be submitted immediately upon termination of the partnership. Failure to file the form on a timely basis may have serious negative consequences for you and your partner! You may be liable for claims paid for your former partner for medical services rendered on and after the date the partnership ended. You may not enroll another domestic partner, or re enroll the same domestic partner, until six months after the date the "Termination of Domestic Partnership" form is filed with the Health Benefits Administrator. Note that if your employer provides COBRA coverage, your former partner's 60 day eligibility period for applying for COBRA continuation coverage starts on the date of relationship termination, not the notification date.

Income Tax Implications

Imputed Income:

Under IRS rules, if a domestic partner is not a "dependent" within the meaning of Section 152 of the Internal Revenue code, the "fair market value" of the partner's coverage, less any contribution by the enrollee, is treated as income for federal tax purposes. Check with your Health Benefits Administrator for an approximation of the fair market value for the Empire Plan. This value, referred to as "imputed income", will be added to your annual salary for income tax purposes and will apply even if you cover other dependents in addition to your partner. If your partner qualifies as a dependent under IRC 152, the imputed income will not be added to your salary. If you qualify for this tax advantage, (and ONLY if you qualify) you must complete the Dependent Tax Affidavit and submit it with your other enrollment documents.

Coverage for Partner's Children

You may provide coverage for your Partner's child (children) if the child permanently resides in your household and you provide 51% or more of the child's support. To enroll the child, ask your Health Benefits Administrator for form PS-457, Statement of Dependence. After you complete the form and return it to your Health Benefits Administrator, you will be advised if the child is eligible for coverage. Documentation of the statements made on the PS-457 may be requested.

PROOF OF SIX MONTH RESIDENCY

To enroll your domestic partner in the New York State benefit programs, you must submit a copy of one item of proof that you and your partner have resided together for at least six months. The proof may be one document with both names or two separate documents that show the residence of each partner. The following is a list of some items that can be used to demonstrate proof of residency. You may submit a copy of another document that proves residency began at least six months ago.

• Driver's license
• Auto registration
• Lease agreement
• Mortgage agreement
• Tax return
• Bank statement
• Passport
• Insurance benefits statement
• Pay check stub
• Utility bill
• Telephone bill
• Joint membership (e.g., church or family association)
  
• Registration as a domestic partnership in the municipalities that have established such a procedure (e.g., New York City, Rochester, Ithaca)

The following are definitions extracted from the Internal Revenue code that may be helpful in determining if a domestic partner qualifies as a dependent for federal tax purposes.

Sec. 152. DEPENDENT DEFINED.

(a) GENERAL DEFINITION.-For the purposes of this subtitle, the term "dependent" means any of the following individuals over half of whose support, for the calendar year in which the taxable year of the taxpayer begins, was received from the taxpayer (or is treated under subsection (c) or (e) as received from the taxpayer):

(9) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household.

(b) RULES RELATING TO GENERAL DEFINITION.-For purposes of this section-

(5) An individual is not a member of the taxpayer's household if at any time during the taxable year of the taxpayer the relationship between such individual and the taxpayer is in violation of local law.