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Smarter Domestic Partner Benefits

Don't launch domestic partner benefits on the fly.

August CoverAs the debate over legalization of same-sex marriage continues and conflicting state laws banning same-sex marriage or recognizing varying forms of same-sex unions evolve, many employers are struggling to understand what offering domestic partner benefits entails and whether the time has come to implement a domestic partner benefits policy of their own.

Employers that offer domestic partner benefits often have several reasons for doing so. A basic sense of fairness drives many employers to offer domestic partner benefits so that employees in same-sex relationships have access to equivalent benefits as employees in opposite-sex relationships. Employers also often find that offering domestic partner benefits is in keeping with their own internal nondiscrimination policies.

One of the most influential factors that employers consider in deciding whether to offer domestic partner benefits is the trend in the employer’s competitive market. Some employers find that offering domestic partner benefits is necessary to recruit and retain top talent. In addition, diversity in the workplace has become an important factor for success as an increasing number of clients and customers are demanding evidence and statistics demonstrating that an employer values and promotes a diverse workplace, which includes diversity on the basis of sexual orientation. And in some states, such as California, Nevada and Oregon, as well as the District of Columbia, equivalent benefits for domestic partners are required.

If you have decided to greenlight domestic partner benefits for your workforce, you’ll need to stop and consider a host of legal, administrative and tax issues before speeding ahead. Domestic partner benefits at one company aren’t necessarily cut from the same cloth as domestic partner benefits at another business. When drafting a domestic partner benefits policy, you’ll first need to decide who qualifies as a domestic partner and what benefits will be offered—questions that can be more complex than they initially sound.

Who Qualifies?

An important consideration in implementing a domestic partner benefits policy is deciding which employees will be eligible to receive benefits. Some employers limit domestic partner benefits to employees in same-sex relationships, since employees in opposite-sex relationships have access to spousal benefits if they marry.

Other employers make domestic partner benefits available to all unmarried employees. Employers that are deciding whether to offer domestic partner benefits to all employees should assess the demand for these benefits and the potential costs they may incur. They also should keep in mind that some cities have passed equal benefit ordinances and some states have passed laws that require employers to make domestic partner benefits available to opposite-sex domestic partners.

Employers should decide what eligibility a domestic partner must satisfy. Most employers set specific criteria for domestic partners to ensure that benefits are extended only to those domestic partners who are the equivalent of legal spouses.


Often, employees and their domestic partners are required to sign affidavits of domestic partnership as proof that the domestic partner is the equivalent of a spouse. The affidavit is a statement that the employee and his or her domestic partner sign under penalty of perjury, attesting to the fact that their domestic partnership satisfies the criteria required by the employer.

Employers should ensure that domestic partnership affidavits are kept confidential in the same manner as medical records, particularly in light of varied public opinions about gay and lesbian issues and the potential impact that identification may have on these employees.

Common Eligibility Criteria

Although employers are able to determine their own criteria that a domestic partnership must satisfy for the employee’s domestic partner to be eligible for benefits, many employers require proof of the same common factors. Many require the employee to attest that he or she has been in a relationship with the domestic partner for at least six or 12 months and that they have shared a common residence for six or 12 months.

In addition, many employers require some proof of financial interdependence. Employers in cities or states with formalized domestic partner registries also may require proof that the employee and his or her domestic partner have formally registered their relationship with the locality.

Nearly all employers also include requirements that the employee and his or her domestic partner must be competent to attest to the relationship, cannot be related to each other to the same degree as required for marriage under the state’s laws, and both meet the minimum age required for marriage under the state’s laws. Employers located in cities or states with equal benefit laws should keep in mind that most of these laws prohibit employers from requiring any more proof of a domestic partnership than that required for spousal relationships.

What Benefits Are Offered?

Private employers generally have great latitude to structure and implement their domestic partner benefits polices in any manner they choose, though the benefits they do offer are governed by a series of federal laws and regulations. However, these benefits get complex because the federal Defense of Marriage Act (DOMA) limits the definition of "marriage" to the union of one man and one woman as husband and wife and defines "spouse" as a person of the opposite sex for all purposes of federal law.

Perhaps the easiest place to start for employers that want to offer domestic partner benefits is with benefits that are not governed by the Employee Retirement Income Security Act (ERISA). These benefits include voluntary benefits such as long-term-care insurance or home and automobile insurance that can easily be extended to domestic partners without incurring additional costs for the employer since the employee pays the full cost of the benefit. Employers can choose to go a step further and extend other nonfederally regulated benefits for which the employer incurs the cost on behalf of domestic partners. Such benefits could include life insurance, employee discounts, moving and relocation expenses, or bereavement and funeral expenses.

An employer that is concerned about the cost of offering domestic partner benefits can still make a number of changes that will send a positive sign to employees without incurring any cost to the employer. An easy option for employers can be to revise their own internal nondiscrimination policies to prohibit sexual orientation discrimination. Although many employers are not required to adopt such broad policies since federal law does not yet ban discrimination on the basis of sexual orientation, a revised policy can be implemented at no cost to the employer and sends a positive message to employees that discrimination of any type will not be tolerated in the workplace. Even small changes, such as addressing company mailings to employee and "guest" rather than employee and "spouse," can be positive indications of the employer’s recognition of domestic partners.

The most common domestic partner benefit offered by employers is extending coverage under the company’s health, dental and vision plans to domestic partners of employees. Employees who opt to enroll a domestic partner in these benefits pay a "married" or "employee plus one" health care premium to cover the domestic partner in the same way that an employee with an opposite-sex spouse would pay for spousal coverage.

Many employers that permit employees to enroll a domestic partner in the company’s health plan also extend continuation coverage to domestic partners upon termination of their coverage, similar to coverage that must be extended to employees and their opposite-sex spouses and dependent children under COBRA. Although domestic partners are not entitled to continuation coverage under COBRA since the federal DOMA limits the definition of "spouse" to a person of the opposite sex for all purposes of federal law, many employers permit domestic partners to extend coverage in a manner consistent with COBRA coverage.

COBRA-like continuation health coverage is another benefit that can often be offered to domestic partners without incurring any costs for employers since, under many employers’ plans, the employees would pay the full cost of the coverage.

The federal DOMA prevents same-sex spouses and domestic partners from being eligible for the new COBRA premium subsidy provided for in the recent American Recovery and Reinvestment Act. Guidance from the Internal Revenue Service has indicated that premiums for COBRA coverage offered by employers to involuntarily terminated employees and their same-sex spouse or domestic partner should be bifurcated to permit the employee to receive the subsidy with respect to his or her own coverage while requiring the employee to pay the full cost of any "COBRA-equivalent" coverage premium for the employee’s same-sex spouse or domestic partner. Few employers are incurring the costs of extending a similar subsidy to their employees’ same-sex spouses and domestic partners since they are unable to recoup the costs of the subsidy from the federal government.

Another benefit commonly offered is extending leave to employees in same-sex relationships to care for a domestic partner who is ill or following the birth or adoption of a domestic partner’s child.

Although less common, some employers choose to extend spousal survivor benefits under a defined benefit pension plan to an employee’s domestic partner.

Tax Implications

A particularly confusing aspect of offering domestic partner benefits is the differing treatment of the value of these benefits under federal and state income tax laws.

Federal law requires employers to impute the fair market value of health care coverage provided to an employee’s domestic partner as income to the employee that is subject to federal income tax, unless the domestic partner otherwise qualifies as the employee’s tax code dependent. Even in Connecticut, Iowa, Maine, Massachusetts, New Hampshire and Vermont, where same-sex marriage is legally recognized, same-sex spouses and domestic partners cannot qualify as the employee’s spouse for federal income tax purposes since the federal DOMA limits the definition of "spouse" to a person of the opposite sex regardless of how "spouse" is defined for purposes of state law.

However, Rep. Jim McDermott, D-Wash., and Sen. Charles Schumer, D-N.Y., have introduced legislation that would exempt the taxation of health benefits for domestic partners.

Domestic partners will rarely qualify as the employee’s dependent due to the narrow definition of dependent under the federal tax code. Unlike premiums for opposite-sex spouses, the cost of a nondependent domestic partner’s health coverage cannot be paid on a pretax basis under a so-called "cafeteria plan" and instead can be paid only by the employee with after-tax premiums. In addition, the employee cannot seek reimbursement for the cost of the coverage from a health reimbursement arrangement or flexible spending account.

States have adopted conflicting approaches to the treatment of domestic partner benefits for state income tax purposes, but most states have chosen to follow the federal approach by enacting their own versions of the DOMA, as either a constitutional amendment or statute that limits the definitions of "marriage" and "spouse" to opposite-sex couples for all purposes of state law. These states impute the fair market value of health care coverage for an employee’s domestic partner as income subject to state income tax, in the same manner as required by federal law.

Conversely, California, Connecticut, the District of Columbia, Iowa, Massachusetts, Nevada, New Jersey, Oregon and Vermont have taken the opposite approach by enacting state laws that specifically exempt domestic partner or same-sex spouse benefits from state income taxes. Employers that offer domestic partner benefits in these states must structure their payroll systems to tax employees on the value of these benefits for federal purposes but not for state purposes.

In addition, these employers must allow employees to pay for domestic partner benefit coverage on a pretax basis for state law purposes. Employers that offer domestic partner benefits should work closely with their legal and tax advisors in sorting through these complex issues.


The authors are attorneys in McDermott Will & Emery’s Chicago office. Solomon is the author of the fifth edition of Domestic Partner Benefits: An Employer’s Guide (Thompson Publishing Group, 2008).

Web Extras

Online sidebar: The Employment Nondiscrimination Act

Online sidebar: Equal Benefits Laws

Online sidebar: Types of Same-Sex Unions Recognized by Various States as of June 2009

Online sidebar: Employer Gross-Ups

SHRM article: Employers Confront Growing Confusion over Partner Benefits (SHRM Online Benefits Discipline)

SHRM sample policy: Domestic Partner Statement & Policy

SHRM article: Sexual Equity in the Workplace (HR Magazine)

SHRM research article: Organizations Providing Same-Sex Domestic Partner Benefits

SHRM article: Iowa Supreme Court Strikes Down Same-Sex Marriage Ban (SHRM Online Legal Issues)

SHRM article: Vermont Passes Same-Sex Marriage Bill (SHRM Online Legal Issues)

SHRM survey report: 2009 Employee Benefits


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