How Do Survivor Benefits for Domestic Partnership Benefits Work?
Kim I. Mills, HRC's education director and oversees HRC WorkNet. May 22, 2002
Q: Dear Kim,
My partner and I have benefits through her employment with the University of Michigan. She is taxed on these benefits. Should she die first, how are my benefits handled? Who pays the taxes? Since the employee is no longer paying them, is that reason for the benefits to be canceled? How have other institutions and the Internal Revenue Service handled this?
It has not been addressed at the University of Michigan. Our human resources people did not have an answer when we posed this question.
Any thoughts or insights would be appreciated.
Susan
A: Dear Susan,
Employers have the option of extending domestic partner benefits to the surviving partner, and some do, following the same scenario as they would for a legal spouse under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1986). COBRA gives workers who lose their health benefits the right to choose to continue group health benefits provided by the plan under certain circumstances. Under COBRA, a legal spouse would be entitled to continued coverage for up to 36 months following the death of the covered employee.
Commonly, the surviving spouse pays 100 percent of the premium, and sometimes a percent or two more to cover administrative expenses. If the same provision were made for a surviving domestic partner, there would be no imputed income -- you'd be paying the whole premium and then some -- and thus no tax hit to the estate of the deceased employee.
Interestingly, Michigan State University has a clearly articulated policy on domestic partner health insurance benefits for surviving spouses. You can read about on the MSU Human Resources website.
I suggest you share MSU's policy with the University of Michigan. Often, employers in the same market sector try to match each other's benefits to attract and keep the best employees. I'm sure you're aware that U-Mich and MSU consider themselves competitors in more than just football!
Good luck