Not yet a Member?
HR Magazine is highlighting the next generation of HR leaders.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
30+ HR education programs, including 4 NEW programs on hot topics, are available for registration.
Join us in Chicago for the latest trends and technology in talent management, and what to expect in the future.
Ernst & Young LLP and its affiliates will reimburse lesbian, gay, bisexual and transgender (LGBT) employees for the additional federal and state taxes they pay on same-sex domestic partners' or spouses' medical benefits in the U.S., making it the first Big Four accounting firm to offer this perk. The tax equalization (gross-up) was effective Jan. 1, 2012.
"Ernst & Young strives to promote an equitable work culture in every way possible," said Karyn Twaronite, Americas inclusiveness officer at Ernst & Young. "Our decision to provide this tax gross-up reinforces our long-standing pledge to foster a work environment that is inclusive for all of our people and signals our ongoing efforts to remain a leader in providing equitable benefits."
Ernst & Young began offering employees in the U.S. same-sex domestic partner benefits in 2002. Under federal law and many state laws, same-sex partnerships are not recognized, causing employees who receive health care for their same-sex partner or spouse under their employer's health plan to incur extra taxes.
As of December 2011, there were only 30 for-profit employers that grossed-up these benefits, according to the Human Rights Campaign (HRC), a civil rights organization working to achieve LGBT equality in the workplace. However, as of Jan. 1, 2012, seven other large U.S. companies began offering these reimbursements as well: Thomson Reuters, American Express, Morgan Stanley, Bank of America, Microsoft, Yahoo and Accenture.
Ernst & Young is the first of the Big Four professional services firms to receive a 100 percent rating for corporate equality from HRC, according to the firm.
How Tax 'Gross-Ups' Work
According to a description provided by Todd A. Solomon, a partner at law firm McDermott Will & Emery, a tax gross-up for the health benefits of same-sex spouses or domestic partners works this way:
• Consider an employer that wants to gross-up an employee in the 20 percent tax bracket. The fair market value of the employee's nondependent same-sex spouse/partner coverage is determined to be $200 per pay period.
• The employee will incur $40 of tax ($200 x 20 percent) for that pay period. To gross-up the employee, the employer would need to make an additional payment of $48 to this employee—$40 would serve as reimbursement for the tax incurred on the benefits coverage and the other $8 ($40 x 20 percent) would serve as an approximate reimbursement of the tax paid on the gross-up payment itself.
Note that this example does not include state tax, Social Security (FICA) and Medicare taxes.
Employees with same-sex spouses or domestic partners will pay about $1,069 more a year in taxes, on average, than a married employee with the same coverage, according to a 2007 report by M.V. Lee Badgett, research director of the Williams Institute, a research group that studies sexual orientation policy issues.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Choose from dozens of free webcasts on the most timely HR topics.
SHRM’s HR Vendor Directory contains over 3,200 companies