| Adding Domestic Partner Affects Take-home Pay |
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PEBB allows you to add a domestic partner (and/or the partner’s children) to your benefit coverage. But if you do, you’ll see a change in your pay. Payroll will withhold more taxes, so you will have less pay to take home.
IRS Sees Coverage as Added Value
The IRS doesn’t view your domestic partner and children the same as a legal spouse and dependent children. The IRS sees partner coverage as a value added to your taxable income. This is called an imputed value on which you must pay taxes.
Imputed Value Means More Taxes
The imputed value is an estimate of the premium cost you would pay if you bought the coverage on the open market. It is not the same as the premium cost in your PEBB handbook. Each year, PEBB reviews the market cost for each of the plans and estimates an imputed value for each plan and coverage tier.
When you enroll a domestic partner or children in PEBB coverage, your payroll system adds the estimate of the imputed value to your taxable wages. Then it withholds taxes on the imputed value. Because the new taxable total is larger than your wages alone, you pay more taxes. The bottom line: you take home less money.
See How It Flows
Jane J Stateworker enrolled for medical and dental coverage on the employee-only tier. Payroll calculates her taxes based on her taxable wages of $3,515.39. After deductions, she takes home $2,665.35. (See Pay Stub A.)
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Pay Stub A
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DESCRIPTION
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HOURS
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RATE
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AMOUNT
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TOTAL –REG
GROSS PAY
FED TAX
STATE TAX
OASDI
MEDICARE
WCD TAX
EMPL DEDNS
NET DEPOSIT
NET CHECK
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184.00
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3,515.39
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3,515.39
3,515.39
237.04
210.00
217.68
50.91
2.76
131.65
2665.35
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YEAR TO DATE INFORMATION
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GROSS PAY
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TAX DEFER
INCOME
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OTHER
TAXABLE
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TAXABLE
INCOME
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31,638.51
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265.41
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31,373.10
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Jane adds her domestic partner to her PEBB employee-only tier. Payroll adds the imputed value of $456.59 to her taxable wages of $3,515.39. Payroll now calculates Jane’s taxes based on the total of $3,971.98.After deductions, Jane’s take-home pay is now $2526.94, for a net pay reduction of $138.41. (See Pay Stub B.)
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PAY STUB B
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DESCRIPTION
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HOURS
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RATE
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AMOUNT
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TOTAL –REG
DOMESTIC PARTNER
GROSS PAY
FED TAX
STATE TAX
OASDI
MEDICARE
WCD TAX
EMPL DEDNS
NET DEPOSIT
NET CHECK
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184.00
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3,515.39
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3,515.39
456.59
3,515.39
305.52
245.00
245.99
57.53
2.76
131.65
2,526.94
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YEAR TO DATE INFORMATION
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GROSS PAY
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TAX DEFER
INCOME
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OTHER
TAXABLE
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TAXABLE
INCOME
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31,638.51
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265.41
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456.59
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31,373.10
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The imputed value will increase if Jane adds coverage for her domestic partner’s children. Again, she will take home less pay.
Note: Even though the imputed value shows as a dollar amount on Jane’s pay stub, she does not receive any additional pay nor does she pay the imputed value as a premium.
More Information
Members and their domestic partners must meet PEBB eligibility. Check here for or more information. Or contact your payroll or benefits office or PEBB.
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