Fair treatment for gay employees with domestic partner benefits

by Josephson Institute on October 21, 2011

What does it mean to treat employees fairly?

For a growing number of major employers, it means paying up so that their gay and heterosexual employees have equal federal tax burdens.

Employer-provided health benefits for their employees’ heterosexual spouses are exempt from federal taxes. But the benefits that an increasing number of employers offer to same-sex spouses, as well as to domestic partners of any type, are taxed as income. This can add a hefty bite to a couple’s tax bill come April 15.


In the name of fairness, there is a growing trend of big employers making their benefits to same-sex couples equal to those of heterosexual couples in reality as well as on paper.  In recent weeks, American Express, Morgan Stanley, and Bank of America all joined the growing lineup of companies that reimburse employees for this additional tax burden.   They join companies like Google, JetBlue, and Accenture. You can see a continually updated list on the Bucks blog at the NY Times.

It’s significant to note that the same IRS rules apply even in states with legalized same-sex marriage, because the federal Defense of Marriage Act (DOMA) trumps state law for all federal purposes.

In addition to the goal of behaving fairly, companies presumably adopt these policies because it helps them to attract and retain great talent. (And this might explain why a number of financial services companies are following each other in quick succession to make this change.)

Image: Flickr user John-Morgan


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