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December 8, 2010, 3:44 pm

Facebook to Reimburse Gay Workers for Benefit Tax

By TARA SIEGEL BERNARD

The movement to equalize health benefits among gay employees with domestic partners continues to pick up speed.

As it stands now, gay workers who are fortunate enough to work for employers that extend health insurance to domestic partners are still at a disadvantage because they are taxed on the value of that coverage — a tax that is not paid by the heterosexual married person in the next cubicle.

But a growing number of companies, now including Facebook, Bain & Company and possibly Boston Consulting Group, are trying to level the playing field for same-sex couples by covering those extra costs, since their unions are not recognized by the federal government. The new policy at Facebook and Bain will take effect on Jan. 1. Boston Consulting said it expected to adopt the policy shortly, and it would also probably take effect on Jan. 1.

“This is a simple matter of fairness,” said Russ Hagey, a Bain senior partner and the firm’s chief talent officer.

The new policies follow similar announcements by Barclays, and also this year, Google. A handful of other large organizations, including Cisco, Kimpton Hotels and the Gates Foundation also cover these costs.

Under federal law, employer-provided health benefits for domestic partners are counted as taxable income, if the partner is not considered a dependent. The tax owed is based on the value of the partner’s coverage paid by the employer.

As a result, employees with 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, which studies sexual orientation policy issues. (Given the escalating cost of health care, those numbers may be even higher now).

Similar to the other companies that have adopted the policy, Bain (including Bain’s nonprofit subsidiary, Bridgespan) said its employees would receive a lump sum reimbursement at the end of each year, essentially a separate line item to cover the taxes. A spokesman for Facebook said that employees’ W-2 forms would be adjusted so that they wouldn’t have to pay for the extra tax. In other words, their income will be increased just enough to cover the extra costs.

The companies said they are not extending this benefit to heterosexual domestic partners because they have the option to marry and avoid the extra tax. (Same-sex couples can get married in some states, but their unions are not federally recognized.)

Members of Congress tried to address the issue last year. In fact, the health care overhaul legislation passed by the House included language that would have eliminated the tax on employer-provided coverage. But the provision did not make it into the final legislation signed by President Obama in March.

Here at Bucks, we’re going to keep track of the companies that decide to cover the costs on a list that we’ll publish in the next several days.

So if you know of other companies or other employers that cover these costs, or any that are considering adopting the policy, please drop their names in the comment section below (or send the names to me via e-mail).