Two Ivy League universities will soon begin reimbursing some of its gay and lesbian employees for the extra taxes they incur when their partners are covered by their health insurance.

The Cost of Being Gay

A look at the financial realities of same-sex partnerships.

Both Columbia and Yale University will begin covering these extra costs on Jan. 1.

Heterosexual married couples don’t owe the tax because they are viewed as an economic unit in the eyes of the federal government. But under federal law, employer-provided health benefits for domestic partners are counted as taxable income (if the partner is not considered a dependent),  so same-sex couples are taxed on the value of the coverage. On top of that, the employees cannot use pretax dollars to pay for their premiums, unlike their opposite-sex married counterparts.

Over the last couple of years, an increasing number of employers have begun to reimburse their gay and lesbian employees because they cannot avoid the tax by getting married (at least for federal purposes). We’ve been keeping tabs on the growing number of companies who are adopting the policy on this chart.

Yale, which is in Connecticut, where same-sex marriage  is legal, will cover at least a portion of the costs for employees with same-sex spouses and those who are joined by a civil union (employees who merely have same-sex domestic partners are not covered). In addition, the benefit will only be extended to employees whose spouses are not eligible for coverage elsewhere.  And instead of calculating each person’s liability, it will pay eligible employees $125 a month, or $1,500 a year, to cover the costs, a figure it came up with by averaging the costs across employees.  The payments will be included in each paycheck.

The inequity became readily apparent last year, when Yale’s payroll system made an error and failed to withhold these taxes. Employees who were affected received a letter that said the university would pay the tax and deduct the amount it paid from employees’ future paychecks, which some employees said they felt wasn’t fair.

Columbia University, which is in New York, another state where gay marriage is legal, said it would pay eligible employees with same-sex partners $1,000 over the course of the year. The policy will go into effect next year for nonunion salaried employees. The benefit would need to be negotiated through collective bargaining for unionized employees, a Columbia spokesman said.

Columbia and Yale join Bowdoin College, which adopted the policy in 2010, and Syracuse University, which began reimbursing its employees in January 2011. Syracuse calculates each eligible employee’s individual liability and then pays up to $1,000 over the year. Graduate assistants are also covered, but they receive their credit as a lump sum at the end of the calendar year.

Do you know of any other universities that have adopted similar policies?

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