Goin’ to the Chapel

A court decision means employers may be required to provide full spousal benefits to gay couples.

Marti Stubblefield, human-resources manager at Hellmuth, Obata + Kassabaum Inc., an architecture firm based in St. Louis ( 2002 revenues: $309 million), says that when the company expanded its benefits program to include domestic partners in 1998, “we anticipated 1 percent enrollment for same-sex partners only, so our actual enrollment of a little over 2 percent for both same and opposite-sex partners is in line with what we expected.”

At Ascent Technology, a 35-employee Cambridge, Massachusetts, developer of information-management software for airlines, when an insurance company refuses to cover a domestic partner, Ascent pays the employee the cash differential. Despite this expense, Alan Hartstone, the company’s finance chief, says he’s seen “no noticeable difference in cost” since Ascent began offering domestic-partner benefits in 2002. And at IBM—which instituted domestic-partner benefits in 1996 after it bought Lotus Development, an early provider of partner benefits—spokesperson Jim Sinocchi says the program has not significantly increased the company’s costs. About 600 IBM employees in the United States currently take advantage of the benefits.

The Questions

Gay marriage is still far from a done deal. Many questions remain as states debate the definition of marriage and the federal government wrestles with its role in the issue. President Bush has said he could support a constitutional amendment limiting marriage to heterosexual unions, which would prohibit states from issuing marriage licenses to same-sex couples. However, Bush has also said the decision should be left to the states, “unless judicial rulings undermine the sanctity of marriage.”

Under the federal Defense of Marriage Act, benefits such as pensions are not subject to new state laws, and states may not be required to recognize out-of-state gay marriages, says Malcolm Hindin, a partner at Palmer & Dodge LLP in Boston. This means that couples who marry in Massachusetts but work elsewhere may not be eligible for spousal coverage. These are issues that will need to be resolved by the courts. For tax purposes, the IRS will likely continue to treat members of same-sex couples as single, taxing the benefits provided to the dependent partner, even if he or she is a Massachusetts resident. “We’re advising clients to continue to impute income for benefits provided to a same-gender spouse,” says The Segal Co.’s Sherman.

The Bottom Line

Despite the uncertainties about the Massachusetts ruling and gay marriage in general, experts suggest that companies examine their existing benefits plans and run a variety of scenarios to calculate the cost of providing different levels of benefits to different groups.

“This is probably just the beginning,” says Gray of Greenberg Traurig. “Other states are probably going to be compelled to deal with this one way or another.”

Kate O’Sullivan is staff writer at CFO.

State-by-State

On January 12, New Jersey became the fifth state to recognize same-sex domestic partnerships. Gov. James McGreevey signed the state’s Domestic Partnership Act into law after it passed the state senate with strong support, at 23 votes to 9. Although the bill does not authorize gay marriage, it extends a host of benefits to qualifying domestic partners, including hospital visitation rights and joint tax status. The state will not require employers to provide health benefits to domestic partners, but health-insurance providers must offer the coverage. State employees’ domestic partners will receive retirement and health benefits, and New Jersey will also now recognize domestic partnerships from other states.

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