The Empire Plan is a unique health insurance plan designed especially for public employees in New York State. Empire Plan benefits include inpatient and outpatient hospital coverage, medical/surgical coverage, Centers of Excellence for transplants, infertility and cancer, home care services, equipment and supplies, mental health and substance abuse coverage and prescription drug coverage.
GOVERNOR
DEPARTMENT OF CIVIL SERVICE
ALBANY, NEW YORK 12239
www.cs.ny.gov
NY11-31
PE11-23
SEHP11-08
TO: New York State and Participating Employer Health Benefit Administrators
FROM: Employee Benefits Division
SUBJECT: Dependent Tax Affidavit Form PS. 425.3
DATE: September 9, 2011
As you are aware, the Marriage Equality Act, signed by Governor Cuomo, became effective July 24, 2011. The Act amends the Domestic Relations Law to provide that a marriage that is otherwise valid shall be valid in New York State regardless of whether the parties to the marriage are of the same or different sex.
As explained in memo NY 11-21, PE, and SEHP 11-07, dated August 16, 2011, since NYSHIP has recognized same-sex spouses for eligibility purposes since May 1, 2007, NYSHIP benefits and eligibility for benefits have not changed as a result of the Marriage Equality Act. However, the Act does affect the tax treatment of NYSHIP benefits for same-sex spouses who are not federally qualified dependents. Prior to the Act, these spouses were subject to imputed income for both Federal and State income tax purposes. The Act changes the tax treatment of NYSHIP benefits by the State; they are no longer subject to imputed income for State tax purposes.
Enrollees whose same-sex spouses are not qualified as dependents under Section 152 of the Federal IRS Code are subject to imputed income for Federal tax purposes; the fair market value of the benefits provided to non-federally qualified dependents is reportable to the IRS as imputed income for the enrollee, and Federal income tax must be paid on that value.
The Dependent Tax Affidavit (Form PS425.3), included with this memo, has been revised to accommodate enrollment requests for enrollees with dependents eligible as a Domestic Partner or the Marriage Equality Act. In addition to the usual enrollment application, the Dependent Tax Affidavit should be provided to your employees at the time of their request to cover a Domestic Partner or Same Sex Spouse under the New York State Health Insurance Program (NYSHIP). It is recommended that you provide your employees with the imputed income information sheet included with this memo, and the imputed income amounts, located on the NYBEAS flat rate summary panel. If the spouse is a qualified dependent for Federal Tax purposes and the enrollee submits a Dependent Tax Affidavit Form attesting to that status, the calculation and reporting of imputed income and the applicable tax is no longer required.
If you have any questions, please contact your processor.
Enclosures
IMPUTED INCOME INFORMATION
When an enrollee's dependent is a non-federally qualified dependent, the fair market value cost of the dependent's coverage is considered additional income to the enrollee. The New York State Health Insurance Program (NYSHIP) considers the fair market value cost the full share cost of individual coverage less the employee's premium contribution for dependent coverage. NYSHIP is required to calculate and report imputed income to the Internal Revenue Service (IRS) for all enrollees who are providing NYSHIP coverage for a non-federally qualified dependent.
Imputed Income
Internal Revenue Service (IRS) rules require that the fair market value of the coverage provided to a non-federally qualified dependent be reported as imputed income to the enrollee. It is recommended that enrollees consult their tax advisor or accountant regarding questions concerning whether their dependent is a "federally qualified" dependent or what the effect of these requirements will be on their personal tax situation. The enrollee is only responsible for the additional tax applicable to the imputed income. This means that the amount of taxable income reported on the enrollee's W-2 will be increased by the fair market value of that coverage and the additional applicable tax will be withheld each pay period.
Imputed income is also reported for enrollees in non-pay status utilizing a MISC-1099. The applicable taxes for imputed income reported for enrollees through a MISC-1099 are assessed when enrollees file their annual tax return.
Imputed income is not an additional amount added to the total premium paid. It is additional taxable income based upon the fair market value of the non-federally qualified dependent's coverage.
Imputed income amounts are available from your agency Health Benefits Administrator or from the Employee Benefits Division of the Department of Civil Service.