A Progress Report on Gay Employee Health Benefits: The Cost of Geing Gay

By TARA SIEGEL BERNARD
Updated | 10/17/11 with new details in chart posted by HRC. Reposted at http://keystothecloset.blogspot.com

A look at the financial realities of same-sex partnerships.
A growing number of companies are covering the extra costs that same-sex couples pay for domestic partner benefits — and even more companies are thinking about it. So we've decided to keep track of who is doing what in a chart at the bottom of this post.

While many companies offer domestic partnership coverage — an important benefit on its own since same-sex couples' unions are not recognized by the federal government — some pioneering organizations are extending an even more generous policy. They're essentially reimbursing gay employees for the extra taxes they may incur as a result of that coverage, something that married heterosexual people don't have to worry about.

Why is this an issue? Gay and lesbian employees who are lucky enough to work at places that have domestic partner coverage are taxed on the value of those benefits (if the partner is not considered a dependent). A handful of companies cover those extra costs, but not until Google adopted that policy earlier this year did the movement to equalize benefits begin to gain traction. Apple is the latest boldface name to join the effort.
A provision within a draft of the health care overhaul bill would have eliminated the tax, but it was ultimately dropped. The Human Rights Campaign said it continued to work on getting a bill passed, but until that happens — if it ever does — employees or their employers must pay the extra tax. (Many companies will cover the costs only for same-sex partners, since opposite-sex couples have the option to marry.)

"Companies that are doing the right thing are doing so at a cost to themselves, and the simplest way to address this inequity is to have the law changed to support or make it easier for them to have equal benefits," said Daryl Herrschaft, director of the Human Rights Campaign's Workplace Project.

Several readers sent us tips on companies that decided to make the change, and they appear on the list below. We also called several large companies that publicly supported the legislation — as part of a coalition led by the Human Rights Campaign — and asked if they planned to adopt the policy, even in the absence of a law.

The biggest deterrent, of course, is the cost. Many companies support efforts to eliminate the tax altogether, but they're unwilling to cover the costs employees now face.

Roughly speaking, it would cost an employer about $2,000 to $2,500 to reimburse — or "gross up" – an employee who incurred extra taxes of $1,200 to $1,500, according to Joseph S. Adams, a partner at McDermott Will & Emery who specializes in employee benefits. The numbers will vary depending on several factors, including the employee's tax bracket and state of residence. This example assumes a 25 percent federal tax bracket (and includes rough estimates for state, local, and employment taxes for Social Security and Medicare, bringing the total rate to about 40 percent).