As the market for talent gets increasingly competitive, businesses are striving to be more inclusive and cast a wider net for the best and brightest hires—and that extends to the benefits they offer employees. A growing number of companies are differentiating themselves by providing domestic partner benefits with many of the same offerings that married couples enjoy.
Though domestic partner benefits have been around for decades, employers traditionally used them to equalize treatment of employees with same-sex partners and provide them with the same rights as their opposite-sex married colleagues. But the legalization of same-sex marriage in 2015 changed that, making it easier for employers to provide benefits to same-sex spouses of employees.
Shifting Views on Domestic Partnerships
Despite initial speculation that employers would discontinue domestic partner benefits as a result of the ruling, many businesses have continued to provide them as part of their efforts to attract and retain talent and build a more diverse, inclusive workplace. With a stagnant marriage rate across all sexes and the rising number of adults living with unmarried partners, according to the Pew Research Center, the landscape of modern families is changing, and more companies are recognizing that.
“Employers are becoming more open-minded about domestic partner benefits, because of the tight talent pool and their need to be more creative and forward-thinking to recruit and retain talent,” says Michelle Thompson, director of human resources for XMI. “If someone they want to hire needs that coverage, but can’t get it, that person might choose to go elsewhere to get those benefits.”
Up to 45 percent of firms reported offering healthcare benefits to same-sex and opposite-sex domestic partners in 2018, according to an annual Employer Health Benefits Survey by the Henry J. Kaiser Family Foundation. Similarly, the percentage of private industry workers with access to health benefits for same-sex and opposite-sex domestic partners increased to 40 and 36 percent respectively in 2018, according to the Bureau of Labor Statistics. Coverage typically includes medical, dental and vision benefits, along with supplemental benefits such as life insurance and certain types of leave.
Stipulations for Offering Domestic Partner Benefits
While allowing employees the option of domestic partner benefits is a good practice to consider—particularly for firms competing with larger corporations for talent— companies should be aware of the complexities involved in managing these benefits.
For example, if children are involved in a domestic partnership, businesses must decide whether to cover them as well or where to draw the line on the benefits they offer—and clearly specify those guidelines in their plans.
It’s also a good idea for businesses that offer domestic partner benefits to clearly define what constitutes a domestic partnership to prevent any ambiguity about who is eligible or any inconsistencies in how the coverage is provided. In most organizations, a domestic partner is defined as an unmarried couple who has lived together for a certain period of time, though definitions can vary depending on cities or states.
Most states, however, have discontinued domestic partnership registries since same-sex marriage was legalized and allow employers to set their own parameters for eligibility. Companies should require domestic partners to produce some kind of documentation of their relationship to prevent employees from scamming the system. For some, this may be as simple as a signed affidavit attesting to the partnership. Others may ask for a driver’s license to show proof of a common address or evidence of joint bank or credit accounts to demonstrate financial interdependence.
Unlike tax-exempt healthcare benefits for spouses of the same or opposite sex, premiums for domestic partners cannot be deducted from pre-tax dollars and must be treated as taxable income to the employee—unless his or her partner qualifies as a tax dependent. To qualify as a tax dependent, the partner must reside with the employee for the entire calendar year and receive more than half of his or her support from the employee.
Domestic partner benefits can be an effective recruiting and retention tool for companies, as long as employers have the knowledge and tools to administer them properly, says Danielle Hall, benefits account manager for XMI.
“Employers need to make sure they are educating employees on the tax implications of domestic partner benefits,” Hall says. “They should also make sure they’re setting up those deductions correctly and the payroll system they use can accommodate that.”