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Employers vying for qualified employees have increasingly
recognized unmarried domestic partners in their employee compensation packages. Whether
taking advantage of these benefits or still waiting for the trend to hit their companies,
unmarried domestic partners should keep certain things in mind when planning for
retirement.
Courting with benefits
In its 1999 report, The State of the Workplace, The Human
Rights Campaign Foundation (HRC) released statistics that show how the number of employers
offering domestic partner benefits has risen steadily since the 1980s.
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- HRC, State of the
Workplace, September, 1999ý
Used with permission.
For the complete report, log onto
www.hrc.org/worknet
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Daryl Herrschaft, research coordinator at HRC, noted that
the percentage of companies offering domestic partners benefits ranges from 13% to 18%,
depending on who does the study.
The definition of domestic partners and what benefits are
awarded varies from company policy to company policy, but most employers, including
municipalities and universities, qualify domestic partnerships based on the cohabitation
of two adults involved in a marriage-equivalent relationship. Some companies may only
recognize same-gender domestic partnerships when doling out benefits.
Employers might offer both "hard" and
"soft" benefits to domestic partners of their employees; for example, medical
insurance as well as a gym membership, while others might only provide low-cost benefits
that exclude health coverage.
The Employee Benefit Research Institute (EBRI), in its
February 2000 Fact Sheet Domestic Partner Benefits, defines domestic partner benefits as
"benefits that an employer voluntarily chooses to offer to an employee's unmarried
partner, whether of the same or opposite sex."
EBRI says the trend toward offering these benefits results
from a competitive labor market. " …Designing a benefits package that appeals to
a diverse work force enables an employer to maintain a recruitment edge and communicates
that the employer values a diverse workforce."
If you are part of a domestic partnership and are wondering
whether your partner may be covered by your benefits, whom should you ask? Karen Altfest,
CFA, a certified financial planner in New York City, recommends that unmarried couples
should "simply go into the employer's human relations department together and ask
what paperwork the company requires."
Indeed, there is no nationally recognized system in place
that defines benefits guidelines for domestic partners, or even defines a domestic
partnership. "Companies establish their own guidelines and policies, locally,"
said Jeremy Hendel, of the American Compensation Association, an organization that helps
companies create domestic partnership policies.
The ACA is due to publish a document in April outlining
methods employers can use to recognize domestic partnerships in compensation packages.
Where are you registered?
A newer option for unmarried couples that is cropping up in
some urban areas is domestic partnership registries. Will this type of formalized
announcement mean anything financially for domestic partners? According to the American
Civil Liberties Union,"Registration systems have two purposes … they give a form
of official status to the relationship ... (and) also create a mechanism for institutions
that want to voluntarily adopt benefit systems or recognition systems."
Indeed, some companies may require you to register as
domestic partners before they will extend benefits to your "other half".
To find out whether your city has a domestic partnership
registry, phone the city government. The ACLU web site has a list you can
check. To find out whether your employer requires you to register with the city, contact
your human resources department.
Domestic partnerships are registered (declarations are
amended as well) at the city clerk's office for a small filing fee. To register, you may
not be registered as a domestic partner to anyone else, or married, or under age 18. The
registry is signed by both partners and notarized by a witness, who does not have to be
notary.
From this day forward
An action that domestic partner employees should take, one
not needed by a married employee, is to designate their partners as beneficiaries to their
401(k) plan. Automatically, these assets go to the participant's spouse in the event of
the participant's death, but the estate is not structured this way for unmarried partners.
One of the best things an employee can do to save for
retirement is to contribute the maximum allowed by law to a company 401(k) plan (as of
Y2K: $10,500 per year, subject to the 25% of pay limitation and other possible limits at
the plan level). Taking advantage of the company's matching contribution helps further
compound retirement assets.
Domestic partnerships share financial interdependence, a
mutual commitment, and perhaps children. The tax implications of domestic partnerships
include the fact that domestic partners do not meet the IRS' definition of a dependent and
are not legal spouses, however, children of domestic partnerships may be considered
dependents.
Another tax tip Altfest tells domestic partners is that
they can give their partner (or anyone else, for that matter) a gift of up to $10,000 a
year with no tax consequences.
To have and to hold
If you are in a domestic partnership, there are steps to
take to provide for the long-term financial health of your household regardless of your
employer's policy on extending benefits to domestic partners.
If you don't hold a marriage contract with your partner,
but do have a long-term commitment that includes saving for retirement, you should take
precise steps to "help safeguard assets and provide financially for domestic
partnerships," says Altfest.
"The one thing you must realize is what you do and
don't have," Altfest said she tells her domestic partner clients. "One thing you
don't have is a marriage contract, which is a contract recognized by state and federal
authorities. There are ways, however, to make up for not having the contract."
Altfest says those include writing a will that makes your
intentions "crystal clear" since they can be contested by family members.
Irrevocable trusts "are never contestable, and are the best way to ensure what your
family will receive," she said.
Other steps to take are life insurance for the major money
earner, and possibly "extramarital agreements" which are "lesser known, but
they do give consideration to each party."
All these documents would have to be drawn up by a lawyer.
Each would cost about the same, with the fee depending on the complexity of family
finances.
You also might want to consider holding essential legal
documents in both partners' names, and naming beneficiaries on any pension, mutual fund,
stock or IRA assets.
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| For more information on domestic
partnership/spousal equivalent benefits at your company, contact: |
American Compensation Association
14040 N. Insight Blvd.
Scottsdale, AZ 85260
tel: (480) 951-9191
fax: (480) 483-8352 |
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