The group also released a sample proposal for organizations to use when advocating for “grossing up,” a method by which an employer can increase employees’ wages to offset the additional tax burden of enrolling a domestic partner for health insurance.
“These tools will help employers turn the protections in the Pension Protection Act that HRC worked so hard to pass in 2006 into reality,” said Human Rights Campaign Foundation President Joe Solmonese. “Every gay, lesbian, bisexual, and transgender worker at a company that provides a retirement plan should make sure they’ve designated their partner as the beneficiary, print out these resources, and take them to their HR department to make sure their retirement plans take advantage of the new tax benefits.”
Gearing Up for PPA
The release of these resources follows the April 7 launch of HRC’s “7 Days to a Better Financial You,” an educational campaign highlighting what the group termed “the unique legal inequalities and hurdles facing the GLBT community with regard to financial, tax, and estate planning issues.” The group noted that, prior to the Pension Protection Act of 2006, domestic partners or other non-spouses did not have an option to roll inherited retirement savings into an IRA, causing them to incur substantial tax penalties. However, under the PPA, an employer may grant the beneficiary the opportunity to roll over funds into an inherited IRA. The Pension Protection Act of 2006 also provides that employees may take distributions for hardships associated with the designated beneficiary. Previously, such hardship distributions were only available for qualifying events related to spouses. According to the announcement, the new HRC resources demonstrate how an employer can easily make the tax-saving options available today, and then update their retirement plan language by the end of 2009, as required by the new law.
The HRC Foundation also released what it called a “first-of-its-kind” sample proposal for “grossing up” the wages of employees who enroll a domestic partner in their health insurance plan. Under current federal tax law, the value of health coverage provided to an employee’s nondependent domestic partner is included in the employee’s taxable income and wages for income and payroll tax purposes, and in reportable wages for the employer’s payroll taxes. These higher tax levels can, according to the HRC Foundation, lead employees to decline the domestic partner coverage and contribute to the problem of the uninsured. The sample proposal includes an explanation of the issue, the business rationale for “grossing up,” and a formula that employers can use to adjust wages.
The Human Rights Campaign is a civil rights organization working to achieve gay, lesbian, bisexual, and transgender equality.
Information about how employers can implement the rollover option is available at:
Information about how employers can implement the hardship withdrawal option is available at:
The sample “grossing up” proposal is available at: