Gays and lesbians have certainly had a tougher go than their heterosexual counterparts when it comes to covering their families through employee benefits, namely health insurance. The environment, however, has vastly improved since 1982 when a New York newspaper, The Village Voice was the first U.S. employer to offer “same-sex” domestic partner benefits. While it is somewhat easier to obtain benefits for you and your partner, the 1996 federal Defense of Marriage Act – which defined marriage as a legal union between one man and one woman – and similar state laws adopted around the country, many challenges remain.
In Texas, some domestic partner benefits can be found, such as funeral or family leave, relocation expenses and partner inclusion at company functions. But there is still much work to be done, particularly when it comes to health insurance.
The insurance industry generally divides companies into two categories: those with more than 50 full-time employees and those with less than 50. More insurers provide domestic partner options for companies with greater than 50 full-time employee’s than those with less.
If you work for, or own, a company surpassing the 50 marker, and currently have an insurance plan but no domestic partner benefits, you may want to consult with either your human resources department or benefits specialist to determine how you might include such a provision. It may be as simple as making an amendment to the current plan or it may require a change altogether to find an insurance provider who allows for such benefits.
A little over a year ago, domestic partner benefits were impossible to find for individuals who either owned or worked for companies with fewer than 50 full-time employees. One insurance company now covers domestic partners for companies of this size, marking a step forward for gay and lesbian employee benefits rights here in Texas.
As a small business employer, being able to offer such a benefit may help improve employee relations. It’s also another tool to help attract and retain employees, especially if benefits for their partner are a priority. Regardless of size, domestic partner benefits are an easy way for any company to offer a high-profile benefit at reasonably low costs.
If you are lucky enough to have these benefits offered by your employer, or you are an employer thinking about adding them, there are some things to consider. Unlike coverage for a federally recognized spouse, same sex domestic partners, unless qualified under the federal IRS definition of a dependent, do not enjoy the same tax advantage when it comes to employee benefits as heterosexuals do. Benefits, such as health or dental insurance for a domestic partner, are seen by the federal government as “imputed income,” and therefore taxable based on its fair market value for both the employee and the employer.
No hard and fast guideline exists for calculating imputed income, especially when working with a fully-insured benefits plan but a commonly-used practice is to calculate the additional premiums an employee pays to add their domestic partner (or any dependents not qualifying under the federal IRS guidelines) as taxable income. Also, this increase in imputed income could now put the employee into a higher tax bracket thus resulting in an even larger tax bill.
Aside from federal taxes, state income taxes may apply as well. Though Texas does not have a state income tax, the same is not true for other parts of the nation. Should you reside in a state with income tax or in one of a handful of states in which civil unions are honored, there may be separate provisions available for benefit taxation you’ll want to be aware of.
As a result, an employee with domestic partner benefits will pay on average an additional $1,070 per year in taxes than a married employee with the same benefits. I recommend consulting with your tax professional prior to making the decision to add your partner and or their dependents. They can help to determine if this is the right choice for you and your family.
if a flex spending account, Health savings account or Health Reimbursement account have been established to assist with pre-tax contributions toward benefits, it is worth noting the money set aside through one of these vehicles is not available for use by your partner or any individual not meeting the federal IRS guidelines of a qualified dependent.
Establishing A Plan
When establishing a domestic partner benefit program, employers should set precise policy as to how they will qualify a partner’s eligibility for the plan. Though no laws require documentation, it is always a good idea to keep things on an even playing field.
A good start is to understand what a domestic partnership is. Generally, a domestic partnership is understood to be a couple, comprised of two unrelated, unmarried, committed adults, in the same household, interdependent both emotionally and financially. Once the domestic partner definition has been established, the decision on who’s offered the benefit must be made. It is a good idea to check with the insurance carrier to see which options are allowed. The three choices are same-sex, opposite-sex or both.
Qualifying the partner is next and no set rules exist. Common “proof” practices are usually a requirement of mutual responsibility, a domestic partner affidavit or both. it is up to the employer to deem what is appropriate for them.
There are many aspects of domestic partner benefits, far more than could ever be written in one article. But it is worth noting that there are now options to add domestic parent benefits for employers in the 2 to 50 full-time employee category. That big step should be celebrated by the gay and lesbian com- munity.
Complexities still exist but small employers have constantly been asking for domestic partner benefits and now they’re here. They may not be right for everyone so it’s important to solicit guidance from professionals when making these decisions.
If you are a company executive looking to implement a benefits plan for the first time or want to add domestic partner benefits to your program, contact your benefits specialist or insurance broker, if don’t have one, contact L Style G Style for a referral.