Benefits Eligibility - Other Qualified Adults (OQA)

If you do not already cover a spouse in your U-M benefits plans you may enroll one Other Qualified Adult (OQA) for benefit coverage if all of the following eligibility criteria are met:

  • You are eligible for U-M benefits; and
  • The OQA, at the time of your requested enrollment, shares a primary residence with you and has done so for the previous 6 continuous months, other than as your employee or tenant.

The following individuals are not eligible for participation in the OQA program if they are your or your spouse's:

  • Parents
  • Parents’ other descendants (siblings, nieces, nephews)
  • Grandparents and their descendants (aunts, uncles, cousins)
  • Renters, boarders, tenants, employees
  • Children* or their descendants (children, grandchildren)

* Your children or your OQA's children may be eligible for coverage as dependent children, but not as other qualified adults. Eligible children of an OQA may be enrolled. Eligibility for an OQA’s child(ren) is defined by the eligibility criteria for dependent children.

See also Married Same-Sex Couples

Dependent Children of an Other Qualified Adult

In addition to coverage for an OQA, you may also elect coverage for the eligible child(ren) of an OQA. The dependent children of an OQA are eligible for coverage through the end of the month they turn age 26.

Coverage Eligibility

Your eligible OQA and your OQA’s eligible children may be enrolled in the following university benefits plans:

  • Health
  • Dental
  • Vision
  • Legal
  • Dependent Life Insurance

Using a Health Care Flexible Spending Account

Under current IRS regulations, expenses of your OQA and/or your OQA’s children can be submitted for reimbursement under a Health Care FSA only if they qualify as eligible dependents that you can claim on your federal income tax return.

Enrolling Your Other Qualified Adult for Coverage

Generally, there are three times when you can add your OQA to your benefits at the University of Michigan:

  1. As a newly hired or newly eligible faculty or staff member
  2. Within 30 days of a qualified mid-year status change. This could include the date your OQA newly satisfies the six-month shared residency requirement for OQAs. Please be aware the university reserves the right to require proof of eligibility upon request.
  3. During the annual Open Enrollment period

Continuous Shared Residency is Required

To remain eligible for coverage, you and your OQA must continuously share the same primary residence. If your OQA no longer resides with you, you must notify the SSC HR Contact Center within 30 days of the date your OQA moved from your residence by calling 734-615-2000 local or 866-647-7657 toll free.  Coverage for your OQA and your OQA’s children will terminate at the end of the month of their move. Failure to provide notification of the loss of eligibility within 30 days may result in additional and unwanted imputed income, in addition to claims and premium costs to you.

COBRA

Although federal law does not require the university to provide OQA’s with COBRA health care continuation coverage, the university will provide such equivalent coverage to OQA’s and their children under the same circumstances as for an employee's spouse and children. OQA’s must apply for COBRA within sixty (60) days of the date that eligibility for coverage ends.

You or your OQA must submit a Notice of Qualifying Event form to report the loss of eligibility within 60 days of the qualifying event and COBRA continuation information will be sent to your OQA. Failure to report the loss of eligibility within 60 days will result in forfeiture of your OQA’s rights to COBRA continuation.

Re-enrollment Following a Prior Loss of Eligibility

If you remove your OQA from your coverage due to a separation or break of shared residency, you may not request enrollment of your OQA until a second period of six months of continuous shared residency has been established.

Taxation of OQA Coverage: What You Need to Know

Faculty and staff members who are considering applying for OQA benefits should be aware of the potential tax consequences. This brief description is not intended as tax or legal advice but rather to alert employees of potential tax ramifications.

Imputed Income

You will pay the same amount for OQA coverage that you would pay for other eligible adult dependents. The contribution amount is determined according to the coverage selected. However, there are additional financial and tax implications to consider.

If you add a dependent to your group health insurance coverage who does not qualify as a tax dependent under the Internal Revenue Code Section 152, the Fair Market Value (FMV) of the contribution or premium amount toward that coverage is considered a taxable fringe benefit, subject to tax withholding. This calculated fringe benefit is known as "imputed income.” This fringe benefit will increase your taxable income.  Therefore, your Federal, State, Social Security and Medicare taxes will increase. As a result, your net pay will decrease.

Imputed Income Reporting

Imputed income for taxes attributable to your OQA and/or their children’s coverage will be reported on one line item described as Dependent Personal Insurance (DPI) under the Hours and Earnings box on your biweekly or monthly pay stub. This amount represents the cost of providing benefits for your OQA and/or their children as well as any employee pre-tax deductions attributable to OQA coverage that must be converted to an after-tax deduction. The effect of reporting this amount as DPI will “gross-up” your actual gross earnings so that required taxes on the imputed income will be deducted from your pay. Imputed income does not affect calculations for university-sponsored life or retirement or disability income. Nor does imputed income affect dependent life or legal plan coverage because both benefits are paid entirely by the employee and deductions are always taken on an after-tax basis.

The imputed income amounts vary by plan and coverage level (i.e., one non-tax dependent, or two or more non-tax dependents.) 

Examples*:
Example A: If you enroll your OQA, your imputed income would be the difference between the cost for You Only and You Only + One Adult coverage. If you enroll you and your OQA in GradCare and Dental Option 1, your monthly imputed income (DPI) would be $246.52. Broken down that equates to $224.00 for GradCare and $22.52 for Dental Option 1. If paid biweekly, your imputed income (DPI) would be $123.26.

Example B: If you enroll your OQA and your child, your imputed income would be the difference between the cost for You + Child and Family coverage. If you enroll all of you in HAP, Dental Option 2, and Vision, your monthly imputed income (DPI) would be $670.56. Broken down that equates to $618.00 for HAP, $42.92 for Dental Option 2 and $9.64 for Vision. If paid biweekly, your imputed income (DPI) would be $335.28.

Example C: If you enroll your OQA and your OQA’s child, your imputed income would be the difference between the cost for You Only and Family coverage. If you enroll all of you in BCBSM Community Blue PPO, Dental Option 3 and Vision coverage, your monthly imputed income (DPI) would be $1,198.10. Broken down that equates to $1,082.00 for Community Blue PPO and $101.76 for Dental Option 3 and $14.34 for Vision. If paid biweekly, your imputed income (DPI) would be $599.05.


*Examples are based on 2015 rates.

To help you calculate the approximate amount and impact of the additional annual taxes you will pay on imputed income for your OQA benefit elections; use the OQA Imputed Income Tax Table and Worksheet below.  

Step 1

The Imputed Income Tax Table below reflects the additional taxation required to cover your OQA and their children depending on your benefit plan and coverage level. This table assumes all of your deductions are taken on a pre-tax basis. Find your benefit plan elections and coverage level on the chart below.
If the composition of your covered dependents differs from those provided in the chart below, please submit an email to OQAImputedIncome@umich.edu to request your imputed income amounts. Please be sure to include your UMID, the group health insurance plans you are enrolled or wish to enroll in (i.e., BCBSM Community Blue PPO and Dental Option 2) and your coverage level description (i.e., you + your OQA + your own child + your OQA’s child) when sending your message.

2015 OQA Imputed Income Tax Tables

Printable PDF

Health Plans


Coverage Level

2015 Monthly Imputed Income Amount

2015 Biweekly Imputed Income Amount

BCBSM Community Blue PPO

You + OQA

$615.00

$307.50

You + OQA + Your Child(ren)

$615.00

$307.50

You + OQA + Your OQA’s Child

$1,082.00

$541.00

BCBSM CMM (Comprehensive Major Medical)

You + OQA

$482.00

$241.00

You + OQA + Your Child(ren)

$482.00

$241.00

You + OQA + Your OQA’s Child

$848.00

$424.00

GradCare

You + OQA

$224.00

$112.00

You + OQA + Your Child(ren)

$224.00

$112.00

You + OQA + Your OQA’s Child

$394.00

$197.00

HAP

You + OQA

$618.00

$309.00

You + OQA + Your Child(ren)

$618.00

$309.00

You + OQA + Your OQA’s Child

$1,087.00

$543.50

U-M Premier Care

You + OQA

$526.00

$263.00

You + OQA + Your Child(ren)

$526.00

$263.00

You + OQA + Your OQA’s Child

$925.00

$462.50

Dental Plan Options


Coverage Level

2015 Monthly Imputed Income Amount

2015 Biweekly Imputed Income Amount

Option 1

You + OQA

$22.52

$11.26

You + OQA + Your Child

$26.80

$13.40

You + OQA + Your Children

$24.66

$12.33

You + OQA + Your OQA’s Child

$49.32

$24.66

Option 2

You + OQA

$38.66

$19.33

You + OQA + Your Child

$42.92

$21.46

You + OQA + Your Children

$40.79

$20.40

You + OQA + Your OQA’s Child

$81.58

$40.79

Option 3

You + OQA

$48.22

$24.11

You + OQA + Your Child

$53.54

$26.77

You + OQA + Your Children

$50.88

$25.44

You + OQA + Your OQA’s Child

$101.76

$50.88

Vision Plan


Coverage Level

2015 Monthly Imputed Income Amount

2015 Biweekly Imputed Income Amount

You + OQA

$4.70

$2.35

You + OQA + Your Child

$9.64

$4.82

You + OQA + Your Children

$7.17

$3.59

You + OQA + Your OQA’s Child

$14.34

$7.17

Step 2

Using your health, dental and/or vision imputed income amounts from the Imputed Income Tax Table, fill in each box in the Imputed Income Worksheet where applicable and follow the instructions through step 10 to arrive at the approximate amount of additional annual taxes you may be assessed for covering your OQA and their children who do not meet the IRC Section 152 definition of qualified dependents. The interactive Imputed Income Worksheet allows you to enter your values online and have the worksheet do the calculations for you.

Keep in mind there are many variables that can affect this estimation. Your federal income tax bracket, your W-4 filing status and the number of exemptions you are claiming, any other pre-tax deductions you may have, such as for Retirement or a Health or Dependent Care FSA are just a few factors that also come into play.

 

Imputed Income Worksheet (click for an interactive worksheet)

1. Your monthly imputed income for medical coverage

$

2. Your monthly imputed income for dental coverage

$

3. Your monthly imputed income for vision coverage.

$

4. Total monthly imputed income (add lines 1 through 3)

$

5a. Enter # of months your OQA will be covered under your U-M coverage

5b. Total annual imputed income (Line 4 x Line 5a)

5a)

5b) $

6a. Enter your federal income tax bracket (0.15, 0.25, 0.28, 0.33 or other)

6b. Estimated annual federal income taxes (Line 5b x Line 6a)

6a)

6b) $

7a. Enter your state income tax rate (0.0425 for Michigan)

7b. Estimated annual state income taxes (Line 5b x Line 7a)

7a)

7b) $

8a. Enter your city tax rate, if any*

8b. Estimated annual0 city income taxes (Line 5b x Line 8a)

8a)

8b) $

9a. Enter the amount shown on Line 5b

9b. Estimated FICA taxes (Line 9a x .0765)

9a) $

9b) $

10. Add lines 6b (Federal), 7b (State), and 8b (City), and 9b (FICA taxes)
This is the total estimated annual taxes you must pay on the imputed income.

$

       * Applies to Flint, Detroit, Jackson, and Lansing

Please Note:  This worksheet is not intended as tax advice but rather to alert employees of potential tax ramifications. Imputed income does not affect calculations for university-sponsored life or retirement or disability benefits. Nor does imputed income affect dependent life or legal plan coverage because both benefits are paid entirely by the employee and deductions are always taken on an after-tax basis.

An Exception to the Rule:  Dependents for Federal Income Tax Purposes

If your OQA and/or his/her eligible dependent children qualify as your dependents under IRC Section 152 (as modified by Code105(b)), the costs for their benefits are not considered taxable income to you.

In order to be considered a tax dependent, your OQA must meet the federal qualifications for a "qualifying relative." Please see IRS Publication 501 for more information. In general for purposes of determining tax dependent status when you are covering the person on your group health insurance policy*, the IRS requires that a "qualifying relative" meet the three tests below:

  • The person does not meet the "qualifying child" tests;
  • The person must live with you all year as a member of your household (and your relationship must not violate local law); and,
  • You must provide more than half of the person’s support for the year.

*Under Internal Revenue Service Notice 2004-79, the IRS gross income limit does not apply for purposes of determining tax dependent status when you are covering the person on your group health insurance policy.

The list above should not be used as the sole source of information for determination of your OQA’s tax status. UM staff cannot provide you with tax advice. As mentioned above, the IRS's tests are described in detail in IRS Publication 501, which is available at the Internet website of the Internal Revenue Service. In addition, you should consult with your tax advisor or the IRS if you have questions on how the federal rules apply to your situation.

An employee wishing to claim his or her OQA and OQA’s dependent children as tax dependents for insurance purposes must complete and sign the Declaration of Tax Status Form. Please be aware Section 152 dependent status must be re-declared each tax year.  The university will assume your OQA and/or your OQA’s child(ren) DO NOT qualify as your tax dependent for tax-free university sponsored group health insurance unless a Declaration of Tax Dependency Form (PDF) is completed at the start of each tax year and is on file with the Benefits Administration Office.

Because the determination of whether a person is a tax dependent for health coverage purposes turns on facts solely within your knowledge, the university cannot make this determination for you. You should make this determination in consultation with your tax professional. Employees are strongly encouraged to consult with a tax advisor before declaring an OQA satisfies each of the above requirements to be considered a qualifying dependent as defined by the IRS.

If You Marry

If you marry your opposite sex OQA, you will need to complete and submit a Dependent Information Form within 30 days of your marriage to report your change in relationship. Call the SSC HR Contact Center at 5-2000 from the Ann Arbor campus, 734-615-2000 locally, or 866-647-7657 toll free, Monday through Friday from 8 a.m. to 5 p.m. to obtain the Dependent Information Form. Because benefits provided to your legal spouse are not considered a taxable fringe benefit, you will no longer be subject to tax withholding for “OQA” coverage as of the date of your marriage.

Required Retroactive Tax Treatment

The university recommends that employees enrolling an OQA or the OQA’s child review their tax status declaration annually during the open enrollment period. The declaration requires the employee to anticipate the dependency status of their OQA or OQA’s child for the upcoming year. It is also important for employees to report any changes in dependency status during the year because IRC Section 152 requires a “look-back” at the dependency status at the end of each calendar year. If dependency changes during the calendar year, a retroactive adjustment will be necessary. Some examples of status changes are identified below.

Example 1: An employee’s OQA qualifies as an IRC Section 152 dependent from January 1 through July 31, but ceases to qualify for the remainder of the tax year. This requires treating the imputed income of the coverage provided for the non-qualified OQA as taxable to the employee (subject to federal income tax, social security, and Medicare taxes) for the entire tax year.

Example 2: The employee indicates that their OQA, who did not qualify as an IRC Section 152 dependent from January 1 to July 31, will qualify for the rest of the year. This requires no changes or corrections, as the OQA must qualify for the entire year in order to receive favorable tax treatment.
Example 3: An employee’s OQA qualifies as an IRC Section 152 dependent and is properly treated as such from January 1 until her death on August 15. The OQA’s death does not change her status for the portion of the year during which she was alive and no adjustments will be necessary.

Final Word

The Imputed Income Tax Table and Imputed Income Tax Worksheet is for illustration only and may not reflect your actual circumstances.  This information is not intended as tax advice but rather to alert employees of potential tax ramifications and IRS rules. The university is not providing you with tax advice nor attempting to evaluate your particular situation. You are urged to consult your own tax advisor(s) or the IRS concerning the federal and state income tax and employment tax ramification from your enrolling an OQA or your OQA’s children in one of the university’s sponsored health plans.

 

 

 

Limitations
The University of Michigan in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their dependents. Although the university has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the university modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the university's right to modify, amend or terminate them.