The Human Rights Campaign – the nation’s largest lesbian, gay, bisexual and transgender (LGBT) civil rights organization – expressed concern for the financial hardship that some Yale employees now face as a result of the University’s failure to withhold federal taxes on domestic partner health benefits in 2010. The University is now demanding that affected employees repay the tax shortfall within the first three months of 2011. This financial hardship, which is the University’s fault, is a burden that should be absorbed by Yale and not the affected employees. Because Federal law discriminatorily taxes domestic partner health benefits, the University should also follow an increasing number of employers who “gross up” the wages of the employees to offset the additional federal tax liability incurred by receiving those benefits.
“The tax penalty on domestic partner health benefits is unjust and the added burden now faced by Yale employees is a clear reminder that equality for all people is not a reality,” said HRC President Joe Solmonese. “The Yale University administration should help its employees by paying for their mistake and ‘grossing-up’ their wages in the future.”
With institutions of higher learning often serving as beacons of fairness and equality, the Yale University payroll department’s error on withholding the taxes shines a spotlight on the discriminatory policy of taxing domestic partner health benefits.
The practice of reimbursing employees for taxes on domestic partner health benefits, called “grossing up,” is increasing in popularity. HRC tracks companies that have this benefit through the Corporate Equality Index (CEI) survey and provides resources for employees and employers on how to implement grossing up policies at: http://www.hrc.org/issues/workplace/benefits/grossing_up.htm. In recent weeks companies like Google, Facebook and Barclays have all announced their decision to “gross up” pay for employees who have enrolled their partners in company benefit programs.
In addition to grossing up, HRC also supports the Tax Equity for Health Plan Beneficiaries Act. The bill would provide uniform tax treatment for employer-provided health benefits by excluding the value of those benefits from an eligible employee’s income, as it does for benefits provided for an opposite-sex spouse or dependent. HRC has helped to build the Business Coalition for Benefit Tax Equity, a coalition of more than 70 major employers supporting passage of this important legislation.
Solmonese added: “It’s time for the federal government to follow the footsteps of the business community in equalizing treatment for LGBT employees under the federal tax code.”
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