Penn extends tax offset to same-sex couples

Same-Sex Benefits

Many members of Penn's faculty and staff take advantage of the employee benefit of paying for health insurance premiums for themselves and their dependents with pre-tax dollars, resulting in a bit more take-home pay.  

But employees who cover a same-sex domestic partner under the University’s benefit plans must pay federal and state taxes on the value of their partner’s coverage. That is because under federal and Pennsylvania tax codes domestic partners are not recognized as dependents.

At Penn, this tax inequality is being addressed.

Beginning July 1, the University will provide a tax offset of up to $125 per month, which will appear in paychecks as additional taxable income, for employees who are covering same-sex domestic partners under their Penn medical plans, with a maximum of $1,500 per year. This offset—minus applicable state and federal taxes—will appear in employees’ paychecks starting in late July.

“Penn has a long history of supporting our LGBT community,” says Jack Heuer, vice president of the Division of Human Resources (HR). “We were the first Ivy League institution, and among the first local employers, to include same-sex domestic partners in our benefits coverage. And now we’re among the first universities to provide this tax offset.”

Early versions of the Obama Administration’s Patient Protection and Affordable Care Act included a tax-equalization provision that would have made health coverage for domestic partners and same-sex spouses free from taxation. But the provision wasn’t included in the final bills signed by President Obama.

Robert W. Carpick, a professor in the School of Engineering and Applied Science, says the tax offset is a “terrific” step for the University and will make more than just a financial difference. He says it will also “have an effect both in retention and recruitment of top talent.

“The effect goes beyond LGBT employees,” Carpick says. “Employees who have LGBT family members or friends are increasingly informed and concerned about institutional policies like these, so this will give many people one more reason to be proud of Penn, and that includes me.”

Employees who’ve elected to cover a same-sex domestic partner under a Penn medical plan should soon receive a letter outlining the tax offset. Any faculty or staff wishing to add a domestic partner to a medical plan has until Saturday, June 30, to do so for coverage effective July 1.

On or after July 1, employees can make changes only during a qualifying life event or the annual Benefits Open Enrollment period.

For additional information on the tax offset, visit the HR website or call the Penn Benefits Center at 1-888-PENNBEN (1-888-736-6236).

Originally published on May 24, 2012