‘Gross-up’ to get a leg up as employer of choice, attorney says

With two small kids, my husband and I work hard to treat them both equally. Equal amounts of hugs, attention, toys, apple juice — you name it. It’s a constant battle that frankly, we never seem to win. But we keep trying, knowing it’s the right thing to do.

You may feel similarly about providing benefits for married employees and employees with domestic partners. Although a good number of employers now offer domestic partner benefits (more than half of the Fortune 500, and even more than one quarter of small employers, stats show), a smaller slice provide tax equity to domestic partners regarding those benefits.

According to Todd Solomon, a partner in the employee benefits practice at McDermott Will & Emery and author of “Domestic Partner Benefits — An Employer’s Guide,” there recently has been a great deal of public attention about the tax inequities of domestic partner benefits, particularly regarding a practice known as “grossing-up.” 

Grossing up, Solomon says, refers to the practice of employers making employees whole for additional taxed owed, thereby ensuring that employees receive the true dollar amount promised to them as compensation.

"A tax gross-up eliminates the tax inequity faced by employees with same-sex domestic partners and is a progressive step designed to provide equal pay for equal work by gay and lesbian employees," Solomon says. "While corporations and law firms have discussed the concept over the last several years, very few have implemented a gross-up."

He cites companies that do "gross-up," including Kimpton Hotels and Cisco, which provide payment for employees who are taxed on the value of medical, dental and vision benefits provided to their domestic partners.

Kimpton and Cisco may not be in the minority for much longer, as Solomon says "the number of inquiries I have received about domestic partner tax gross-ups has significantly increased within the past six months. This is sure to be a trend going forward as covering this tax will undoubtedly be a competitive advantage for many large organizations."

What about your company? Do you provide domestic partner benefits? If so, do you or have plans to “gross-up” to provide tax equity? Do you believe doing so gives you a competitive advantage for talent? Share your thoughts in the comments.