Biglaw, Gay, Gay Marriage, Health Care / Medicine, Money, Perks / Fringe Benefits, Tax Law

Biglaw Perk Watch: The Gay Gross-Up Goes Top Tier

The case for same-sex marriage should rest less upon dollars and cents and more upon fundamental principles of fairness (as recently argued by Professor Jaye Cee Whitehead in a New York Times op-ed piece). But it’s certainly the case that money matters should not be overlooked when it comes to marriage equality.

We’ve previously discussed a non-salary benefit that we’ve nicknamed the gay gross-up. Here’s one concise definition: “A ‘gross-up’ for employees who enroll same-sex partners in the Firm’s health benefits plans to offset any federal, state and local income taxes paid on the value of the partners’ benefits which heterosexual spouses are not subject to.” (Currently gay couples in which partners receive employer-provided health benefits are taxed on the value of those benefits, due to the fact that, thanks to the Defense of Marriage Act (DOMA), federal law — including federal tax law — doesn’t recognize same-sex unions.)

The gross-up is not a perk that affects a huge number of employees, to be sure. But having it sends an important message about a firm’s commitment to equality and inclusion.

Where did we obtain that handy definition of the gross-up? From the benefits page of a top law firm that recently started offering this benefit. It’s one of two elite law firms that recently boarded the gay gross-up bandwagon….

The firm whose website we quoted for the gross-up definition is Simpson Thacher. STB started offering the gay gross-up as of April 1, 2011.

“Rumors started around January, and it was officially announced in March,” a Simpson source told us. “It’s all the buzz here!”

Perhaps Simpson’s move inspired action from one of its “peer firms”: Skadden Arps. On Friday afternoon, Skadden sent around a firm-wide memo announcing that it too would implement the gay gross-up, retroactive to January 1, 2011. We’ve reprinted the full Skadden memo at the end of this post.

We heard the news from a number of happy Skaddenites. “Love it,” said one. “But how common is this?”

Answer: not that common, at least in Biglaw. According to the Human Rights Campaign (HRC):

As of May 2011, the HRC Foundation is aware of fifteen for-profit employers — including Bain & Co. Inc., Barclays Capital, Cisco Systems Inc., Credit Suisse USA Inc., Discovery Communications Inc., Facebook Inc., Fenwick & West LLP, Google Inc., Kimpton Hotels & Restaurants, McDermott Will & Emery LLP, McKinsey & Co. Inc., Morrison & Foerster LLP, Orrick, Herrington & Sutcliffe LLP, Simpson, Thacher & Bartlett LLP, Winston & Strawn LLP — that have instituted a grossing up policy. Furthermore, several large businesses and law firms have indicated they will implement the benefit in 2011.

Thanks to the example set by top-tier firms like Simpson and Skadden, expect this list to grow going forward.

P.S. We think we can add a few law firms to the HRC’s list. Upon information and belief, the gay gross-up is also offered by Cadwalader and Linklaters.

(Please correct us if we’re wrong about any of these firms, or alert us to additional large law firms that offer this benefit, by email (subject line: “Gay Gross-Up”). Thanks.)

UPDATE (1:25 PM): Add Bingham McCutchen to the list. The firm started offering the gross-up as of January 1, 2011. Bingham’s benefit summary for new hires states: “To help offset the additional taxes that employees in same-sex relationships are subject to when enrolled in health insurance, we ‘gross up’ pay by $100 per month for these employees.”

UPDATE (5/18/11): Also on board is Dickstein Shapiro, which announced the news by firm-wide email on March 30, effectively April 1, 2011.

The Wrong Reasons for Same-Sex Marriage [The New York Times]

Earlier: Biglaw Perk Watch: MoFo Takes a Stand for Fairness
Prior ATL coverage of the gay gross-up


We are pleased to announce that retroactive to January 1, 2011, the Firm will expand its benefits program to provide a tax gross-up payment for partners and employees who are taxed on the value of health benefits provided by the Firm to their same-sex spouses or same-sex domestic partners. In providing this payment, Skadden is taking the lead, along with a small number of other law firms and major corporations, in addressing a key aspect of legislated workplace inequality for LGBT personnel.

Under current federal and state income tax law and the federal Defense of Marriage Act (“DOMA”), as well as, in many states, state versions of DOMA, the value of health insurance benefits for same-sex couples (regardless of marital status under state law) is treated as additional imputed taxable income for the partner or employee. The Firm is providing this gross-up in an effort to offset that additional tax cost. Married Skadden partners and employees who opt to cover their opposite-sex spouses under the Firm’s health plans are not subject to a similar tax cost. Our new gross-up policy seeks to ameliorate the discriminatory impact of these federal and state laws for LGBT partners and employees.

The Firm will calculate the gross-up for qualifying attorneys and staff, using a single assumed, combined federal, state and local tax rate. The gross-up will be limited in 2011 to those who elected to cover their same-sex domestic partners on their applicable benefit plan(s) through: (i) the Partners’ Welfare Benefits Program, (ii) the employees’ CHOICE Benefits Program, and/or (iii) the voluntary Vision Plan.* The Firm will revisit the policy from time to time to determine whether or not it is achieving its goals. The Firm also expects that it would reconsider the policy in the event that DOMA is repealed or declared unconstitutional.

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