On July 30, 2019, California passed SB 30 (“bill”), which changes the requirements for domestic partnership under California law. The bill expands domestic partnership eligibility by eliminating the requirement that individuals be of the same sex or of the opposite sex and over the age of 62 in order to enter into a registered domestic partnership.
Since California law requires carriers to treat “registered domestic partners” the same as spouses, carriers will be required to provide coverage to newly eligible individuals who register as domestic partners. In addition, certain employers will be required to enroll newly registered domestic partners of their California employees onto their health plan.
Compliance Snapshot
- California expanded the eligibility definition for registered domestic partnership, removing the requirement that individuals either be the opposite sex or the same sex and over the age of 62.
- Under California insurance law, carriers must offer the same benefits to registered domestic partners as they do for spouses.
- Employers should be aware that more employees may be eligible for and enter into registered domestic partnerships and they may request their domestic partner be added to the employer plan.
- Employers should design a policy around domestic partner enrollment regarding plan eligibility requirements, mid-year enrollments, and any needed documentation for proof of a domestic partnership.
- Employers should ensure their payroll department is properly imputing income for the cost of domestic partner coverage.
How does SB30 change the requirements of a registered domestic partnership in California?
In general, individuals can become domestic partners if they meet the criteria under Section 297 of the Family Code and file a Declaration of Domestic Partnership or a Confidential Declaration of Partnership.
SB30 makes the following changes to the domestic partnership requirements:
- Removes the requirement that both persons are of the same sex or persons are of opposite sex and over the age of 62;
- Provides an exemption to the $23 domestic partnership registration fee when one or both domestic partners are over the age of 62;
- Removes the requirement that “Declaration of Domestic Partnership” and “Notice of Termination of Domestic Partnership” forms be available at the office of each county clerk; and
- Requires the “Declaration of Domestic Partnership” and “Notice of Termination of Domestic Partnership” forms be available at the office or website of the Secretary of State.
How do the new requirements for domestic partnership affect health care benefits?
Under the new requirements, more individuals will be eligible for registered domestic partnership. Since California law already requires carriers to treat registered domestic partners the same as spouses, more employees may enter into registered domestic partnerships and enroll their registered domestic partners onto their employer-sponsored coverage.
Under California Insurance Equity Act and SB 757, all group health plans marketed, issued or delivered to a California resident must offer equal coverage for spouses and registered domestic partners, regardless of the location of the employer. This means that if a carrier offers benefits to spouses, they must offer the same coverage to registered domestic partners, under the same terms and conditions. Individuals with legal unions from other jurisdictions will also be considered registered domestic partners under California law if the union is substantially equivalent domestic partnership to California.
It is important to note that California law does not require carriers to treat un-registered domestic partners the same as spouses. Although not required, certain carriers “may” treat “un-registered” domestic partners the same as spouses. As such, an employer’s particular medical plan policy will govern whether benefits are made available to un-registered domestic partners.
Are employers required to offer coverage to domestic partners if they offer coverage to spouses?
Whether an employer is required to offer coverage to domestic partners of California employees depends on whether the employer sponsors a fully-insured or self-insured plan and whether the domestic partnership is registered or unregistered, as outlined below:
- Registered Domestic Partners: Employers who sponsor fully-insured plans that offer coverage to spouses of their California employees must also offer coverage to registered domestic partners, as defined under Section 297 of the Family Code.
- Un-registered Domestic Partners: Employers can, but are not required to, offer coverage to un-registered domestic partners if their carrier allows. Employers should review their specific insurance policy information to be certain.
- Self-Insured Employers: Employers who sponsor self-insured plans can choose to offer coverage to registered and/or unregistered domestic partners but are not required to follow state insurance law.
What are administrative considerations when enrolling a new domestic partner?
Employers should understand the administrative and payroll implications for enrolling domestic partners onto their plan, as outlined below.
Documentation of Domestic Partnership
Under the California Insurance Equity Act, carriers can only require documentation of domestic partnership if they also require proof of marriage. Employers should check with their carrier to determine whether their carrier requires such proof. If carriers do not require documentation, employers can, but are not required to, collect documentation of domestic partnership, but only if they also request documentation of marriage, as well.
Enrollment of New Domestic Partners
Employers may allow employees to add their domestic partner to their coverage outside of the open enrollment period when they enter into a new domestic partnership mid-year. Employers will need to confirm with their carrier that they will allow for this type of special enrollment. On the other hand, the acquisition of a new domestic partner, in and of itself, does not trigger a HIPAA special enrollment right because domestic partners are not recognized as “spouses” under federal law. If employers don’t allow domestic partner special enrollment, employees can enroll their domestic partner during the next open enrollment period.
What are federal and California taxation considerations when enrolling a domestic partner?
Employers should understand the payroll implications for enrolling domestic partners onto their plans, as outlined below.
Federal Taxation for Registered Domestic Partners
Registered domestic partners are not considered “spouses” for federal tax purposes. As such, healthcare benefits are not available to domestic partners on a pre-tax basis (unless the domestic partner is a “tax dependent” under federal law). This means that an employee who covers their domestic partner on their employer-sponsored health coverage must pay federal taxes on the cost of health care premiums paid to cover their domestic partner.
Employers should ensure their payroll team is “imputing” or adding the cost of health care for a domestic partner on an employee’s W-2 and withholding federal payroll taxes.
California Taxes for Registered Domestic Partners
California affords the same rights to registered domestic partners as to married individuals. As such, amounts spent on domestic partner healthcare is exempt from California taxes under Revenue and Taxation Code section 17021.7.
This means that a California employee who covers their registered domestic partner on their employer plan would have to pay federal taxes (but not California state taxes) on the cost of coverage for their domestic partner.
California and Federal Taxes for Unregistered Domestic Partners
It is important to note that un-registered domestic partners are not afforded the same benefits as spouses under California law. This means that employees who cover their un-registered domestic partners on their employer plan must pay both state and federal taxes on the cost of coverage for their domestic partner. Employers must “impute” the cost of coverage for unregistered domestic partners and withhold the proper California state and federal taxes.
Employer Next Steps:
- Domestic Partner Coverage: Employers who sponsor fully insured plans should ensure that they are offering health care coverage to registered domestic partners. Employers can, but are not required to, offer coverage to unregistered domestic partners.
- Domestic Partner Policy: Employers should have a policy on which domestic partners (unregistered and/or registered domestic partners) are covered under their plan and whether they require proof of domestic partnership for plan enrollment.
- Imputed Income: Employers should ensure they are properly imputing income for the cost of domestic partner coverage for federal tax purposes.
Additional Resources:
The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.
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