A client alert from law firm Wang, Kobayashi, Austin LLC said the Illinois Department of Insurance is expected to issue guidance on the impact of the civil union law on fully-insured health plans issued in Illinois.
According to the law firm, it is widely anticipated that such guidance will require fully-insured health plans issued in Illinois that provide spousal coverage to offer such coverage to an employee’s civil union partner. Sponsors of fully-insured health plans should discuss these changes with their plan insurer/broker. Plan amendments and updates to plan communications and enrollment materials may be required.
Until further clarification from the IRS, coverage extended to civil union partners under fully-insured plans is treated as taxable (imputed income) for federal tax purposes, but excludable for Illinois state tax purposes, the alert said. Plan sponsors should notify their payroll departments of the tax treatment applicable to such coverage.
Illinois continuation coverage laws are expected to apply to civil union partners.
According to the alert, the Act does not require self-insured health plans to provide coverage to an employee’s civil union partner absent any other basis for coverage (e.g., the plan covers certain individuals who are dependents under federal tax law and the civil union partner qualifies as such a dependent), but plan sponsors may voluntarily extend benefits to civil union partners.
The law firm suggests plan sponsors review the plan’s definition of “spouse.” Some plans as written may begin to cover civil union partners effective June 1 based on their current definition of “spouse.” Plan sponsors should determine whether to make coverage available to civil union partners, and if so, sponsors will need to notify their coverage carriers, stop loss insurers, and brokers and make the appropriate plan amendments and updates to plan communications and enrollment materials.
Until further clarification from the IRS, coverage extended to civil union partners under self-insured plans is treated as taxable (imputed income) for federal tax purposes, but excludable for Illinois state tax purposes. Plan sponsors should notify their payroll departments of the tax treatment applicable to such coverage.
Currently, health care expenses and dependent care expenses of an employee’s civil union partner are not eligible for reimbursement, unless the civil union partner qualifies as a “dependent” under Section 152 of the Internal Revenue Code, in accordance with the plan document.Defined contribution plans and defined benefit pension plans are not required to recognize Illinois civil union partners for plan purposes. However, the plan’s definition of “spouse” may include civil union partners. Plan sponsors should review their retirement plan documents and consider whether the documents appropriately reflect who is a “spouse” for purposes of the plan.