Biglaw, Gay, Gay Marriage, Health Care / Medicine, Ho-Love, Money, Munger Tolles & Olson, Perks / Fringe Benefits, Tax Law

Biglaw Perk Watch: Has the Gay Gross-Up Hit the Tipping Point?

It’s late October, so Biglaw bonus news could drop any day now. In 2010, Cravath didn’t kick off the season until November 22. But back in 2009, Cravath announced bonuses on November 2. And in 2007 — yes, the glory days, before the Great Recession — Cravath announced bonuses, regular and “special,” on October 29.

In light of the economic gloom and doom, including the possibility of a double-dip recession, it wouldn’t be shocking if bonuses are modest this year. Better to conserve the cash and avoid layoffs, right? Or maybe repeat what happened in 2010 and save some money for spring bonuses in a few months, when firms might have a better idea of the direction of the economy?

Regardless of how bonuses turn out, there are other pockets of good news in the world of large law firms — even news requiring law firms to open their wallets. Check out the growing number of firms that offer the perk we’ve dubbed the gay gross-up….

If you don’t like putting the words “gay” and “gross” in such close proximity, you can call it the “tax offset for domestic partner health benefits” or the “tax equalization for same-sex health benefits.” To learn what this benefit is all about, read this prior post.

Since our last round-up, we’ve learned of additional major law firms (i.e., Am Law or Vault 100) that offer the gay gross-up. Here are additional firms to welcome to the club [FN1]:

  • Hogan Lovells
  • Latham & Watkins
  • Milbank Tweed
  • Munger, Tolles & Olson
  • Reed Smith
  • Ropes & Gray
  • SNR Denton

Memos for Latham and Milbank are reprinted at the end of this post. They might be of interest to firms that are thinking of adding this benefit and looking for how to word their announcements.

Note that not all of these firms are newcomers. Some of them, such as Munger Tolles and Reed Smith, have had the benefit for some time, and we just happened to learn of the news recently. For example, Reed Smith has had the gross-up since 2007, as noted in this statement issued by the firm to ATL:

Reed Smith was among the first of the AmLaw 100 law firms to provide domestic partner benefits and the gross up pay benefit for its LGBT employees, the latter being a benefit many law firms still have not adopted. As a result of the LGBT Subcommittee’s direct access to senior management, it raised this important issue affecting the firm’s LGBT workforce at Reed Smith’s Diversity Retreat in 2007. The issue involved federal tax treatment of medical benefits for the domestic partners of gay and lesbian employees. Members of the LGBT Subcommittee met with firm Chairman and Global Managing Partner Greg Jordan to point out that federal law treated, and still does treat, money spent by an employee for his/her domestic partner’s medical insurance as taxable income, while that paid for a heterosexual spouse’s medical insurance is not. The group comprising individuals from Reed Smith’s U.S. and European offices maintained that this was an unfair hardship and sought ways to work with the firm to mitigate the impact of this law.

During the course of that meeting, senior management agreed that Reed Smith should take steps to mitigate this impact, and as a result, in 2007, Reed Smith became one of the first global law firms to add the gross up pay benefit for its LGBT employees to the already adopted provision of full benefits to domestic partners. At the end of each year, there is a one time adjustment in pay to those eligible for the benefit to mitigate the impact of the federal tax law.

This benefit doesn’t affect a huge number of people, but it does send an important message about diversity and inclusion — a message that gay lawyers greatly appreciate. Here’s what one of them, at a firm with the gay gross-up, recently told us:

Been an openly gay associate here for [several] years, and the firm has been nothing but welcoming, supportive, and extremely generous with gbltq sponsorship support in [various cities]. Glad we’re adding our name to the gross up list.

It’s still a big-law soul-consuming job, but at least the firm cares about equality and justice (and eating souls).

Here is the updated, complete list of firms (almost 30) that share this concern for equality and justice, as reflected in their providing the tax offset for domestic partner health benefits:

Please email us, subject line “Gay Gross-Up,” with corrections or additions to our list. Thanks!

[FN1] Some of these firms were mentioned in updates to our last post, but if we didn’t mention them at the time of that post’s initial publication, we’re giving them another shout-out here, so they get their full time in the sun.

P.S. The New York Times also tracks which firms have made this commitment to LGBT workplace equality. If you’d like to see your firm on the NYT list, please contact Tara Siegel Bernard.

For Gay Employees, an Equalizer [New York Times]
A Progress Report on Gay Employee Health Benefits [Bucks / New York Times]

Earlier: Prior ATL coverage of the gay gross-up


New Benefit for Employees Covering a Domestic Partner or Same-Sex Spouse on their Health Insurance

In the next few days, you will be receiving annual enrollment materials which include information about an exciting new benefit. We are pleased to announce that the firm will make a salary gross-up payment to employees who cover a same-sex spouse or a same-sex or opposite-sex domestic partner and the children of such spouses or domestic partners on their health insurance plans, effective January 1, 2012.

Under current federal income tax law, as well as the laws of many states, employees are required to make after-tax contributions to cover a same-sex spouse or domestic partner and their children on their health insurance plans. Furthermore, the value of health insurance benefits for same-sex spouses and domestic partners and their children is treated as imputed taxable income. The salary gross-up payment is intended to mitigate the inequitable impact of these laws.


From: Wagner, Christine
Sent: Wednesday, September 07, 2011 4:52 PM
To: #DC All; #LA All; #NY All
Subject: Sent on Behalf of the Diversity Committee – Tax Equalization for Same-Sex Health Benefits

We are pleased to announce that effective October 1, 2011, Milbank will offer a new benefit to eligible U.S. employees to offset the unequal tax burden imposed on those who elect health benefits for their same-sex domestic partners or spouses.

Unlike employees with opposite-sex spouses, employees who elect health benefits for same-sex spouses and domestic partners must pay benefit premiums with after-tax dollars. Additionally, the value of Milbank’s contribution to these benefits is considered additional imputed income to the employee. Milbank will offer a gross-up payment to eligible U.S. employees to cover the differential tax burden described above.

Milbank was the first major law firm to offer health benefits to same-sex partners and today is at the forefront of law firms and corporations offering tax equalization. This reflects the Firm’s active commitment to creating an inclusive environment where all employees are valued for their contributions.

Those wishing to elect coverage for 2012 will have the opportunity to do so during open enrollment. In the meantime, if you have any questions please contact Valerie Green at [xxxx].

Christine Wagner
Chief Legal Personnel Officer

ATL Law Firm Directory
(hidden for your protection)

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