Effort Growing to Offset Tax Amounts Paid by LGBT Employees

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A small but growing number of large employers have begun implementing policies that offset the additional taxes employees who have same-sex spouses or domestic partners enrolled in company health benefit plans must pay.

“July 2011 is where this took off and became a bigger issue,” attorney Todd Solomon, a partner in the employee benefits practice at McDermott Will & Emery in Chicago, told BNA Nov. 1. “Before 2010, this was on people's radar screen as an issue, but nobody was doing it.”

Today, Solomon said about 50 companies have adopted policies to provide tax gross-ups to workers to help cover costs tied to having a same-sex spouse or partner enrolled in the employers' medical, dental, or vision plans. Grossing up an affected employee's income involves the employer paying to the worker the approximate amount he or she must pay in taxes for the partner's coverage.

Citing information from the Human Rights Campaign, a national gay civil rights organization in Washington, D.C., and a New York Times blog that keeps track of this trend, representatives at consulting firm Marsh & McLennan Companies noted Oct. 31 that employers that provide this benefit include Accenture, American Express, Apple, Cisco Systems Inc., Goldman Sachs, Google, Microsoft, Yale University, and McDermott Will & Emery, among other law firms.

Solomon was scheduled to discuss the “Life Cycle of Domestic Partner Benefits” at the 2012 Out & Equal Workplace Summit, held in Baltimore Oct. 29-Nov. 1, but was unable to attend because of weather conditions on the East Coast.

'Domestic Partner Tax Equalization'

During the conference, the Marsh & McLennan representatives announced that the firm will begin providing “domestic partner tax equalization” in January 2013. The benefit will be available to all of the firm's married lesbian, gay, bisexual, and transgender employees, they said, as well as those who live in states where they cannot legally marry.

Kathryn Komsa, vice president, chief diversity officer, global human resources, at Marsh & McLennan, and her co-presenter, James Campbell, an actuary and partner at Mercer, said that the average medical plan cost per employee is $9,385, according to Mercer's 2011 national survey of employer-sponsored health plans. Mercer is a Marsh & McLennan subsidiary.

An employer's expected projected cost of tax equalization is $2,500 to $3,500 per employee, they said, though costs will vary based on an employer's actual plan costs and coverages included. “You can design the benefit to manage that cost,” Campbell said, noting that there are different ways to do this.

Solomon said that, on average, a lesbian, gay, bisexual, or transgender employee will pay $1,069 a year in federal taxes for a same-sex spouse's benefits, according to HRC data.

“This is primarily an issue of pay equity--equal pay for equal work,” he said of the benefits-related tax employees with same-sex partners must pay. “More and more companies are saying, 'We don't like that result.' ”

By Rhonda Smith  


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