For gay couples, benefits with a cost

And they wonder why we want marriage...

This is one of the reasons.

For more than a decade, a focus of gay rights groups and other activists has been persuading employers to offer health insurance and other benefits to the domestic partners of unmarried employees. And Jessup was pleased that his employer was among those that did. [...]

Employer-provided group insurance “was a great plus for us because he is a self-employed writer and content developer,” Jessup, 39, said of partner Bob Chenoweth. J.P. Morgan’s coverage “was much cheaper than what he could get on his own.”

But there was shock in store.

“Something I didn’t understand at the time was how much the taxes would be. I was very surprised when I started doing my taxes” this spring, said Jessup, who is in Morgan’s commercial banking division in Indianapolis.

Under federal law, any portion of an employer-paid insurance premium that goes for coverage for a domestic partner is treated as taxable income to the employee. The employee also may not make any payments for partner coverage, such as premiums under a “cafeteria” benefit plan, with pretax dollars. [...]

“My taxes went up $150 a month. That’s something I hadn’t planned for,” he said of the reduction in his paycheck caused by additional withholding.

First, employer-paid health insurance is tax-free only for employees, their spouses and dependents. “A man and a woman who have not officially gotten married are in the same boat,” said Christopher Colwell of the accounting firm BDO Seidman LLP.

Heterosexual couples have the option of getting married; same-sex couples do not, except in Massachusetts. Even if they did, it wouldn’t help with the tax treatment.

The Defense of Marriage Act, passed by Congress and signed by President Bill Clinton in 1996, defines marriage for the purposes of federal law as “a legal union between one man and one woman as husband and wife” and stipulates that “spouse” refers “only to a person of the opposite sex who is a husband or a wife.” It requires that both these definitions be used “in determining the meaning of any Act of Congress.”

Thus, same-sex couples, no matter what states do, will remain unable to get federal-tax-free health insurance for one partner through the other’s employer. A 1997 study by the General Accounting Office found 1,049 federal laws in which marital status is a factor. (source)