Question: The company grosses up the fair market value of health benefits provided to employees’ same-sex domestic partners. One employee already had family coverage for his children before he enrolled his partner. How is the gross up calculated, if the cost of coverage doesn’t increase because the plan charges employees a flat amount for family coverage, regardless of the number of individuals covered?
Answer: The IRS doesn’t have a set formula for this. You could, for example, compare the cost of self-only coverage and employee-plus-one coverage. The difference, minus any amount the employee pays, would be the fair market value of the coverage and the amount to be grossed up. You might consider running this by your company’s tax professionals, just to be on the safe side.