Are Domestic Partner Benefits Now Obsolete?

Posted by on Nov 9, 2015 in News | 0 comments

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Domestic partner benefits began more than 30 years ago as an effort to offer benefits similar to spousal benefits to gay and lesbian employees that were otherwise unqualified for such benefits due to prohibitions on marriage between same sex couples. In 1982, The Village Voice, a weekly newspaper in New York City, became the first employer in the U.S. to offer domestic partner benefits. Over the years such benefits became more widely available with Lotus Development Corp., the first publicly traded company to offer domestic partner benefits in 1992, the State of Vermont offering domestic partnership benefits to public employees in 1995, and Hawaii following suit in 1997.

These days, many states provide domestic partner benefits to employees. Many companies within the private sector also offer domestic partner benefits. According to the Bureau of Labor Statistics, in 2014 about 35 percent have access for same sex partners and 30 percent of private industry workers have access to domestic partner benefits for opposite sex partners.

What exactly is a domestic partner?

The term “domestic partner” has no consistent legal definition, so employers have had to create something. Employers generally define domestic partners as unmarried same sex couples (some include opposite sex couples) who cohabitate and seek benefits similar to those offered to married couples. Some form of domestic partnerships are recognized by California, Washington D.C., Nevada, Oregon, Washington, Colorado, Hawaii, Illinois, New Jersey, New Hampshire, Massachusetts, Maine, Vermont, Connecticut and Wisconsin, although some states refer to it as civil unions. Domestic partner benefits are offered by businesses, government offices, private companies, universities, states and other organizations and often include:

  • Health, dental and vision insurance
  • Death benefits
  • Accident and life insurance
  • Sick and bereavement leave
  • Housing rights
  • Parental leave

Issues for employers and employees

Since there is no legal requirement for employers to offer domestic partner benefits, employers were left to navigate these waters on their own and freely decide whether or not to offer them at all. The problem is that providing domestic partner benefits has been a messy process with many gray areas, just a few examples are:

  • How do you differentiate between a domestic partnership and common law marriage?
  • Do you only provide domestic partner benefits where same sex marriages were illegal?
  • Do you require domestic partners to be “together” for a predetermined amount of time before qualifying for benefits? (How is “together” defined?)

There is also the matter of taxes, as the IRS allows healthcare benefits to be provided tax free to employees and legal dependents. Some states, however, didn’t recognize domestic partner marriages, so employees receiving domestic partner benefits are taxed on them. Most employers treat employee contributions for healthcare benefits as pre-tax earnings, however this can only be done for legally recognized dependents, significantly complicating payroll and tax reporting functions.

How does legalizing same-sex marriage affect domestic partner benefits?

The Supreme Court of the United States ruling in Obergefell v. Hodges stated that states can no longer keep same-sex couples from marrying and must recognize their unions, which strips away the foundational reasoning that domestic partner benefits were based on.

Now that same sex marriage is legal throughout the United States with no legal obstacles, and for the sake of simplifying their tax considerations and administrative responsibilities, many employers are likely to eliminate their domestic partner benefits.

Possible backlash of ending domestic partnership benefits

Many L.G.B.T. groups are encouraging employers to continue offering domestic partner benefits. A chief concern of such organizations are that there are still nearly 25 states that have not implemented antidiscrimination laws to protect individuals based on their sexual orientation. In such locations, same sex couples who marry in order to receive benefits could potentially risk housing discrimination and credit denial.

The fate of domestic partner benefits lies in the hands of each employer, but given the difficulties in defining tax status and qualification requirements, it’s a good bet that many companies will be reluctant to implement new domestic partner benefit packages if they are not already in place. Having said that, many benefits professionals agree that it is unlikely that employers will drop domestic partner benefits without at least providing ample time for employees to qualify or seek alternate benefit opportunities.

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