Author Topic: Are fees imposed by employer for spousal coverage taxable?  (Read 2900 times)

therethere

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Are fees imposed by employer for spousal coverage taxable?
« on: October 24, 2016, 09:03:14 AM »
Just in time for open enrollment my employer sent out a letter with changes to our health plan. Now if I keep DH on my health plan there will be a $100 a month penalty since he is covered by his employer also. So great I just got a $1,200  a year penalty. Coincidentally this will be more than the standard 2.5% annual raise. So its actually like my salary decreased this year. Awesome.

Is this penalty taxable income?

ZiziPB

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #1 on: October 24, 2016, 09:06:37 AM »
Would it make more sense for your DH to be on his employer plan?  Is his plan so expensive that it makes sense to pay the penalty?

therethere

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #2 on: October 24, 2016, 09:44:10 AM »
Just premium to premium his can be break even or more expensive than the penalty. But taxes and the loss of a family HSA will definitely play into what is the better choice.

ZiziPB

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #3 on: October 24, 2016, 10:09:07 AM »
Can he have his own HSA instead? 

I doubt that the penalty is payable with before-tax dollars but you should check with your employer.  Are they considering the penalty as an additional premium or is it truly a penalty?

Catbert

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #4 on: October 24, 2016, 10:45:40 AM »
Is this really a *penalty* or just a cost of getting health insurance for husband?  If it is  "penalty" I'm pretty sure it would be post-tax dollars.  If *just* an extra health insurance cost then it should be payable pre-tax.

therethere

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #5 on: October 24, 2016, 10:51:24 AM »
I don't have the exact wording right now. But it would be a penalty or fee imposed by my employer on a monthly basis to continue having DH on my health plan. It is distinctly separate than the premium of employee+spouse. This is because he is eligible to get a health plan from his employer but we are currently using mine instead. If he has a change in eligibility midway through the year premium stays the same but the additional fee is removed.

This just rubs me the wrong way. Coworkers have stay at home spouse and a truck load of children. But I have to pay a penalty. DINKs getting the short stick again.

ZiziPB

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #6 on: October 24, 2016, 11:02:21 AM »
I don't have the exact wording right now. But it would be a penalty or fee imposed by my employer on a monthly basis to continue having DH on my health plan. It is distinctly separate than the premium of employee+spouse. This is because he is eligible to get a health plan from his employer but we are currently using mine instead. If he has a change in eligibility midway through the year premium stays the same but the additional fee is removed.

This just rubs me the wrong way. Coworkers have stay at home spouse and a truck load of children. But I have to pay a penalty. DINKs getting the short stick again.
I would contact HR for clarification - it's a new feature in your plan and they need to be able to tell you whether it's pre- or post-tax.
Can your husband open his own HSA if he is under his employer's plan?

Need2Save

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #7 on: October 24, 2016, 06:10:37 PM »
The penalty should not be taxable income.  They should build it into the premiums they deduct from your paycheck. 

If you are not subject to the penalty, you pay rate X on a pre-tax basis.
If you are subject to the penalty because your spouse works and he/she also has coverage available to them, you pay rate Y on a pre-tax basis.   

In your case, the difference between X and Y is an extra $100 in premiums but both are taken on a pre-tax basis. 

Your employer is clearly trying to dissuade spouses from enrolling in the plan to save money.  This is becoming more and more common as employers try to find ways to keep health plans down.  They are hoping the penalty encourages more families to put the spouse on other coverage.  We've debated this for several years at my company but I have always pushed back and found other saving opportunities.  Unfortunately, it's all a trade off.  You upset some people but keep others happy.   

therethere

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #8 on: October 25, 2016, 07:54:22 AM »
No response from HR (big surprise). But they are known to be completely useless. The wording they used is $100/month "surcharge." Which to me sounds like its taxable. Really I'm looking for someone who already has this in their plan and can comment.

PathtoFIRE

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #9 on: October 25, 2016, 09:31:47 AM »
therethere, my employer-provided health care insurance was also blessed with a spousal surcharge, $25 per biweekly paycheck. On my paycheck, it is listed as a Before-tax deduction, right next to medical, dental, 401k, etc. Now I haven't actually prepared federal taxes with this surcharge in place, so I can't say for certain whether it ends up being pre-tax, but at least my company believes it will be.

Also, these spousal charges are no doubt going to be ubiquitous soon, after all, once a few companies start pushing the spouses of some of their employees off of their plans and onto the plans of other companies, there will become clear winners and losers in this setup, and the rest will follow suit.

Bettis

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #10 on: October 25, 2016, 11:30:30 AM »
I'm not sure the legalities/tax code but I checked my workplace's website and it is referred to as a "pre-tax spousal surcharge". 

therethere

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Re: Are fees imposed by employer for spousal coverage taxable?
« Reply #11 on: October 25, 2016, 02:45:38 PM »
Thank you for your experience! If its pretax the surcharge won't be awful. That makes it break even in premium change versus the surcharge. The plan was to max out the family HSA for a few years to build up a comfortable buffer. So it sucks to lose that contribution space. Oh well. I am leaning towards having DH switch to a separate plan anyway and make a list of any and all ailments to fix while he actually has real coverage for once!


This is by no ways a complaint as I've seen some of the outrageous premiums others are being quoted for ACA plans. Healthcare coverage is just getting way too ridiculous on all fronts.