Since 1982, when the Village Voice offered domestic-partner benefits to its employees, some 41 percent of the Fortune 500, along with thousands of smaller companies, have followed suit, according to the Human Rights Campaign. But in the wake of a recent Massachusetts Supreme Judicial Court ruling granting gay couples the right to marry, employers will face significantly greater demand for such benefits. In Massachusetts they may soon be required to offer full spousal benefits to gay couples who wed.
In its 4-to-3 decision on November 18, Massachusetts’s highest court gave the state legislature 180 days to figure out a way to enact the ruling. Although the state senate responded with a civil-unions proposal, the court rejected that possibility, saying that civil unions without the title of marriage would create “unconstitutional, inferior, and discriminatory status for same-sex couples” (see “Legal Unease,” at the end of this article).
Although legal and benefits experts are in a wait-and-see mode, they say it’s not too soon for employers to start thinking about which benefits they may need to add or adjust. “Come May [when the ruling theoretically becomes law], people are going to be in their HR manager’s office the next day—if not that afternoon—saying, ‘I’m married, here’s my license, and I want my benefits,’” says Andrew D. Sherman, senior vice president at The Segal Co., an employee-benefits consultancy based in New York.
While the decision will initially affect only Massachusetts workers, it is expected to have an impact well beyond state borders as similar cases head to court. (One such suit is pending in New Jersey.) And although companies aren’t legally obliged to offer benefits that are required in one state to employees in every state, in practice they often aim to provide consistent treatment to all.
For employees, the difference between spousal and domestic-partner status is significant: employees pay income tax on the imputed value of benefits provided to domestic partners; they do not pay additional income tax on the value of employer-provided benefits for spouses. Moreover, domestic-partner coverage is often limited to health care, while married couples may also receive coverage for children, maternity and paternity leave, bereavement leave, and sick leave to care for a spouse, not to mention survivor benefits such as ongoing pension payments or disbursement from a profit-sharing plan, proceeds under a life-insurance policy, and unpaid wages in the event of a spouse’s death.
For employers, the financial impact of providing spousal coverage to married gay couples will depend on the structure of their benefits plans. “In the simplest sense, if you think of employee policies, anywhere it mentions the term spouse, it’s going to also include the same-sex spouse,” says Alfred A. Gray, an attorney with Greenberg Traurig LLP in Boston, who specializes in labor and employment law.
“There absolutely will be a difference in cost,” he adds, especially with HMO costs expected to rise almost 14 percent in 2004, according to a study by The Segal Co. Overall, however, the price may not be as high as some have feared. Thus far, companies that provide coverage for domestic partners have felt only a minimal impact. In 2000, a Hewitt Associates study found that domestic-partner benefits comprised less than 1 percent of benefit costs at 85 percent of responding companies. In part because each partner often receives benefits from his or her own employer, enrollment tends to be low—less than 1 percent of employees, according to the Hewitt study.