The city of Cambridge, Mass., may be the first municipality to equalize the cost of health benefits for its gay employees, following the lead of many corporations.

Unlike married couples, employees who use domestic partner health coverage for their partners must pay taxes on the value of that coverage (unless the partner is considered a dependent). If the federal government recognized same-sex marriage, these couples could avoid the tax since it doesn’t apply to heterosexual married people. On top of that, employees can’t use pretax dollars to pay for their partner’s insurance premiums — another bonus that’s available only to opposite-sex married couples.

So after Cambridge officials were made aware of the issue through a city employee who had to pay the extra taxes, they decided to reimburse employees for the extra costs. The policy will go into effect on July 1 for nonunion employees; it will go into effect for union employees “pending collective bargaining obligations.”

“The tax implication for same-sex married couples working for the city created an unfair situation that the City Council chose to address,” David Maher, the Cambridge mayor, said in a statement. “This action is the right and fair thing to do until the federal government addresses this issue.”

An increasing number of companies have started to reimburse employees with same-sex partners who are covered by the insurance. (In fact, some organizations have even extended the policy to their employees with opposite-sex domestic partners.)

Massachusetts is one of the five states, in addition to the District of Columbia, that issues marriage licenses to same-sex couples.

“Cambridge is indeed the first municipality to gross up city employees’ benefits to account for unequal treatment under federal law,” said Sarah Warbelow, state legislative director for the Human Rights Campaign. “While it is hard to say with certainty, I think many cities and counties will want to follow suit. Particularly, those located in states with marriage equality or civil unions/ domestic partnerships.”

After learning about the issue, the City Council passed a “policy order” that requested that the city manager figure out a potential solution, said Lee Gianetti, the mayor’s chief of staff. The city spoke with private sector employers that had adopted the policy, including Google, about their approach. Ultimately, the city decided to pay employees a quarterly stipend equivalent to 20 percent of the taxable income that the employee incurred as a result of the insurance.

In a letter to the Cambridge City Council, the city’s personnel director, Michael P. Gardner, said that the 20 percent figure was recommended as “the best estimate of the marginal tax rate for more persons who would be eligible for this benefit.”

The city currently provides health or dental insurance benefits to the same-sex spouses of 22 city and school department employees. Reimbursing city employees will cost the city  about $12,000, while it will cost another $21,000 for school department employees, who are largely unionized.

The letter also recommends that if the federal tax law changes, “ending the unequal treatment of spousal benefits,” the city should end the subsidy program.

Many states and municipalities are focusing on reining in budgets, but do you know of any other municipalities that are mulling this over? Which do you think might be next?

Article source: http://feeds.nytimes.com/click.phdo?i=54398c3fae54a5a073a38839c27d74ad