Is domestic partner coverage required?

In recent years, a growing number of states have enacted laws that grant committed same-sex couples the same rights and benefits as married couples. In these states, employee benefit plans that provide insured benefits through state-regulated carriers must generally offer coverage to domestic partners. Employers with health care plans that are governed by ERISA are essentially exempt from these state insurance requirements. Similarly, employers with self-insured plans are not required by federal or state law to offer such benefits. There are also local ordinances that require municipalities to extend domestic partner benefits to their employees. Of course, many organizations choose to voluntarily offer domestic partner benefits as well.

Issues to consider. Before designing and implementing a domestic partner benefit program, a company needs to consider several issues, including:

• what benefits should be offered to domestic partners;

• who should be eligible to receive these benefits;

• how much will the domestic partner benefit program cost; and

• what are the tax consequences to employees.

After deciding to implement a benefits program for the domestic partners of its employees, a company may find its efforts thwarted by health care vendors or state insurance departments. Some insurers do not cover domestic partners in employers' health plans due to the state insurance department's failure to approve the filing to allow this coverage. Employers implementing domestic partner benefits need to investigate these potential state law obstacles before acting.

Benefits to be offered. Employers choosing to offer domestic partner benefits face a number of choices. For instance, they could choose to offer a full range of benefits. Alternatively, they may decide to limit the offerings to health insurance or to very specific benefits such as bereavement leave. A company might also choose to offer those benefits that are normally offered to a spouse.

Domestic partners generally are not qualified beneficiaries under COBRA. However, COBRA-like issues are raised (see ¶42,530 ).

Eligibility for domestic partner benefits. After deciding what benefits to provide, employers need to decide to whom these benefits should be offered. The definition of a domestic partner varies from company to company. One decision to be made is whether benefits should be limited to domestic partners who cannot marry under the laws of their sate or whether benefits should be offered to all unmarried partners who meet certain requirements.

Typically, companies offering domestic partner benefits require that domestic partners:

• be over age 18;

• share a committed relationship;

• have an exclusive relationship; and

• be financially interdependent.

Employers offering domestic partner benefits often require proof of the relationship, such as a written affirmation of the partnership or documents that confirm that the partners reside at the same address (postmarked letters, drivers' license, tax returns, or bank statements). Remember that employers should be careful that the proof of the relationship is relevant and is not an invasion of privacy.

Tax treatment. Employees cannot exclude from gross income amounts paid by their employers towards health insurance for their domestic partners unless the domestic partner is a legal spouse or dependent.