Employee medical premiums are determined based on the type of medical plan selected (level of coverage) by the employee and the annual salary of the employee. These premiums are deducted from the employees’ pay on an after- 06/2018 tax basis. The “fair market value” of the selected medical plan is the total cost of the plan to 91 minus the total cost of the plan prior to adding the domestic partner. Premiums deducted on an after tax basis are deducted from the “fair market value” of the plan and this amount is considered as imputed income on the employee’s W-2.
As an example, a single employee with an annual salary of $40,000 is enrolled in the Medical Mutual 90/70 medical plan and will pay $33.36 (single rate) per month pre-tax for medical coverage. The employee adds a domestic partner on January 1, 2009. When the domestic partner is added, the monthly premium will increase to $88.32 (family rate) and is deducted from the employee’s pay on an after tax basis.
Imputed income for W2 earnings is calculated by subtracting 91’s total cost of the Medical Mutual 90/70 single plan ($359.95 per month) from the 91’s total cost of the Medical Mutual 90/70 family plan ($953.41 per month). The difference of $593.46 per month is considered the “fair market value” of the plan. This amount of $593.46 is reduced by the new after tax monthly premium of $88.32 (family rate) to yield an imputed income amount of $505.14 per month or $6,061.68 being added to the employee’s W2 statement for the year.