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Domestic Partnerships and COBRADomestic partners have no legal rights to continued health care coverage under COBRA. However, most employers who offer domestic partner benefits will provide a look-a-like COBRA benefit with the cooperation and approval of the insurance carrier. The coverage, its duration, its qualifying events, etc., are under the control of the employer and the insurance carrier without regard to the COBRA statute or its regulations. There is a significant risk under federal law for any employer who treats the non-employee partner as a dependent. It is important that the employer obtain either an affidavit from the employee or copies of the current federal income tax return showing the dependent status of the non-employee partner. Absent proof, the employer may be subject to financial penalties for under-withholding of income tax, FICA, FUTA, and for under-reporting of income, in the event that the non-employee partner does not qualify as a dependent for purpose of the employee’s federal income tax return. In the event that any state recognizes a domestic partnership as a legal marriage, the federal income tax treatment we have discussed most likely will change. The California legislature enacted legislation (AB 26) establishing a state-wide domestic partnership registry (Registry) and criteria for qualifying as a domestic partnership (Family Code Section 297), effective July 1, 2000 for purposes of the Registry. It also gave permission for public agencies who wish to do so, to provide domestic partnership health care benefits upon the approval of its governing body. State agencies who authorize domestic partner coverage must use the Registry. Private employers can also use the Registry as criteria for offering domestic partnership benefits or use its own criteria. In 2001, the California legislature expanded upon the initial legislation by providing tax relief for registered domestic partnerships and expanding property rights for registered partners. (AB 25). On average, employment based benefits, such as health, dental, vision, life insurance, and pension coverage, comprise approximately forty percent of an employee’s total compensation package. For many years, most employers providing health and dental benefits, in particular, have offered optional coverage for employees’ spouses and children. Only in recent years have employers begun to offer benefits to the domestic partners of employees. In 1982, the New York City weekly paper, The Village Voice, became one of the first employers to offer domestic partner health benefits to its Gay and Lesbian employees. Today, hundreds of private sector employers, offer domestic partner benefits to same-sex, and sometimes opposite-sex, partners Approximately 64 states and municipalities have passed domestic partnership laws and about 69 colleges offer domestic partner benefits. While coverage may be limited to a leave policy to care for a sick partner or attend a funeral, many employers extend health coverage to an employees’ partners, and sometimes to their partners’ children. The typical American family has changed. In 1960, married couples with children comprised almost three-quarters of all U.S. households in 1960. Today, about 50% of all households are married couples with children. Many of these new "families" are comprised of same-sex and opposite-sex couples. This shift in family make-up, as well as the increasing emphasis on family and equality issues, is causing employers to include domestic partner benefits to employees as part of a benefit package. Employers may be particularly sensitive to this issue during these times of low unemployment. Offering domestic partner benefits to unmarried partners is one way to attract and retain quality employees. The first step toward winning domestic partner benefits may be bargaining for anti-discrimination language in the union’s collective bargaining agreement. Negotiating contract language to prohibit discrimination on the basis of sexual orientation may open the door to winning "no cost" benefits, such as the right to use sick leave to care for a partner. This then sets the ground work for subsequent negotiations to include benefits that have dollar costs attached. Definition of Benefits -- The first step is to provide the employer with a definition of benefits that the union is seeking and how those benefits compare with the benefits already available to married spouses. Typically the union would propose that Gay and Lesbian employees’ partners are offered the same benefits with the same cost sharing provisions as are spouses and other legal dependents of employees. For example, if the employer contributes the full premium payment for spousal health coverage, full payment should be made on behalf of an employee’s domestic partner (although the value of coverage will be taxable to employees). Likewise, if the employer’s plan covers the children of employee’s spouses, it should cover the children of domestic partners, at the same cost. Health plan enrollment for domestic partners should coincide with the enrollment periods for traditional spouses. While domestic partners do not have a legal right to Consolidated Budget and Reconciliation Act (COBRA) coverage, there is no prohibition for the employer offering such coverage. COBRA requires employers to offer continued health coverage to qualified beneficiaries following certain qualifying events. Another issue involves the proposed eligibility criteria for domestic partnership. While there is no standard definition of a domestic partnership, most employers require the employee and the partner be each other’s sole domestic partner, be at least 18 years of age, be not legally married to another person, and not be related to each other in a way that would prohibit marriage. Some employers require that domestic partners be financially responsible for each other’s welfare or at least financially interdependent. In lieu of signing for full financial responsibility of another, financial interdependence can be proven by submitting copies of joint financial obligations such as a lease, mortgage, or credit card bill. Though data for this area is still limited, the Society for Human Resource Management found that employers that offer domestic partner benefits tend to offer them to both same and opposite-sex couples. This applies to the public sector, as well. Most jurisdictions with domestic partner benefits provide those benefits to all partners meeting the eligibility requirements, be they heterosexual or same sex. Limiting benefits to only one group could lead to equal protection claims, particularly in the public sector. Today more than 3,400 employers offer domestic partnership benefits. Some employers may require partners seeking benefits to reside together in order to curb potential abuse. However, employers and insurers have learned that these concerns are unfounded. Workers must pay taxes on the value of the benefits that their partner receives, which creates an obvious disincentive for abusing the benefits. Also, when the domestic partner benefit is only offered to same sex couples, employees must self-identify themselves as Gay or Lesbian. Some employees are reluctant to make this identification. In spite of these arguments, some insurers and employers insist on joint residency of domestic partners. If the employer or insurer will not adjust their position on this issue, the union should fight for a policy that waives the requirement if one of the partners is temporarily living separately, but intends to return on a permanent basis. This may occur because of work assignments or other obligations. Historically, married employees and Gay and Lesbian employees with domestic partners are not treated equally when it comes to proof of eligibility for benefits. Employers typically extend health coverage to spouses on the basis of a verbal declaration of eligibility. However, most employers and/or insurers require more proof of a domestic partnership. Typically, the employee must submit a signed declaration or affidavit of eligibility. Some employers even require the document to be notarized. Employers may accept other proof, such as joint bank account statements, mortgages, or other similar bills, or may require that such items be submitted along with the signed affidavit. Some states and cities have domestic partner registries. Where these are available, partners are usually required to register. Most employers require an employee to notify the health plan administrator within a specified time period (usually 31 days) if the domestic partnership ends, the partner dies, or the partner no longer meets the eligibility criteria. Once coverage is terminated, typically there is some specified time period that must pass before a new domestic partner of an employee is eligible for benefits. Some employers believe the inclusion of domestic partners in the group health plan will substantially increase plan costs. Experience does not support this assumption. In fact, employers offering domestic partner health coverage have found that the cost is equal to, and in some cases lower than, the cost of covering the population at large. One factor in keeping costs down is low domestic partner enrollment. Typically, less than three percent of eligible employees sign up for domestic partner benefits. This figure drops to less than one percent if the benefit is offered only to same-sex partners. Some very expensive health problems, such as premature births, are more common in the population at large than among couples in domestic partnerships. When providing Domestic Partner Health Insurance, there are no tax consequences for the employer. However, the Internal Revenue Service requires that the employee pay income taxes on the "fair market value" of the portion of the premium for the domestic partner’s coverage that is paid by the employer. The IRS has not defined fair market value, but it could be interpreted to mean the difference between the cost of single coverage and that for domestic partner coverage, less any amount paid by the employee. |
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