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Rori Andreason, city recorder and human resources director at Midvale City, says that this was indeed the city’s experience when it added domestic partner benefits for city employees. “The actual number of people who were added, however, was an additional two or three people. That was it.”
In practice, for many organizations, the number of employees who add a domestic partner to their insurance has been low. And not all insurers charge a higher premium either. Von Madsen says, “At ARUP, 4.5 percent of our employees have registered a domestic partner with us. Of those, less than half purchase insurance benefits through ARUP. We’ve been doing this for a long time, and we haven’t had any insurance vendors charge us more for offering their product to domestic partners.”
For married couples, as recognized under federal law, the value of the health insurance premium paid by the employer for the employee can be excluded from the employee’s gross income. It is a pre-tax benefit to the employee. This is not the case with a domestic partner.
The IRS does not recognize domestic partnerships or same-sex marriages, even though same-sex marriages are recognized by several states. Therefore, the portion of the insurance premium paid by the employer for a domestic partner is considered taxable income to the employee.
A report by the Williams Institute & Center for American Progress estimated that employees who included a domestic partner on their insurance plan paid an average of $1,069 per year more in taxes than would a married employee with the same coverage.
To deal with this issue, many companies, like American Express, will provide a tax-equalization “gross-up” to cover the additional federal and state taxes employees must pay for adding a domestic partner on their insurance coverage.
This issue also financially affects the employer. Both Federal Social Security (FICA) and unemployment insurance (FUTA) taxes are based on employees’ taxable income. Therefore, companies end up paying increased FICA and FUTA taxes.
Another issue for employees is that they cannot use pre-tax dollars to pay for a domestic partner’s health insurance coverage. This puts them at a disadvantage in being able to pay for healthcare expenses using flexible spending accounts, health reimbursement accounts or health savings accounts.
Winning Hearts and Minds
In spite of the additional costs to both employee and employer, more and more companies are opting to offer domestic partner benefits. As Tannen Ellis-Graham, director of operations and human resources at The Living Planet Aquarium, says, “We are looking into offering domestic partner benefits in order to enjoy a competitive edge and reinforce diversity and non-discrimination policies and initiatives. One purpose of a benefits program is to provide a safety net for employees and their families, thereby enabling employees to focus more on their work.”
The greatest asset an employee can bring to work is no longer a strong back. Today’s companies need the hearts and minds of their employees. Even though the actual number of participants is low, offering domestic partner benefits is one way many companies are now choosing to accomplish this objective. It’s an alternative that many companies feel meets the needs of a changing workforce.
Who is a Domestic Partner?
To establish a domestic relationship, an employee usually must provide an affidavit stating that the person they wish to include as a domestic partner meets certain requirements, such as:
62 percent of Fortune 500 companies offer domestic partner health benefits.
Source: Human Rights Campaign Foundation
31 percent of U.S. employers offer domestic
partner health benefits.
Source: U.S. Department of Labor
25 percent of Utah employers provide domestic partner benefits.
Source: The Employers Council’s 2013-2014 National &
Utah Policies & Benefits Survey.
A sample of local organizations that offer domestic partner benefits:
CHG Healthcare Services
Management and Training Corporation
University of Utah
Salt Lake Brewing Company
West Valley City
Salt Lake City