In the state of Wisconsin, tens of thousands of LGBT couples and unmarried straight couples do not enjoy the same legal rights, safeguards, and security as married couples—in areas ranging from property ownership1 to family-medical leave2 to notification after one partner has been the victim of a crime3. Our laws explicitly give rights in these areas to married couples, but they make no provision for unmarried couples in long-term, committed relationships. This creates what we call the FAIRNESS GAP.
This information is provided for informational and educational purposes only. Fair Wisconsin does not render professional or legal services, and nothing contained in or linked to our Web site should be construed as legal advice (which always must be tailored to the facts of a particular case).
DEFINITIONS
Imputed Income Rather than coming from cash sources, this type of payment comes in the form of benefits or by having another party incur expenses for services received. When these benefits go to the spouse or dependents of an employee, federal tax law excludes this imputed income from the employee’s gross income. In contrast, when these benefits go to significant others that are not considered spouses or dependents, the imputed income from these benefits is added to the employee’s gross income, which is taxed.
Special Enrollment The general rule for enrolling into employer benefit plans is that there is only a short period when someone can apply for the following year. Special enrollment is an exception to this rule. It provides employees with an opportunity to enroll when certain work or life events occur, regardless of the regular enrollment dates.
Generally, special enrollment is available when you, your spouse or your dependents lose other coverage, when you marry, or when you have a new child by birth, adoption or placement for adoption. There is no statutory requirement of a special enrollment for LGBT partners enrolled in an employer benefit plan.
Open Enrollment (also called ‘Annual Enrollment’) A period of time, usually occurring once per year, when employees of a company may make additions, changes or deletions to their fringe benefit options. In most cases, employees can only change their benefit plans during these open enrollment periods.
Chapter 4
In the previous chapter of the Fairness Gap, we shined a light on the plight of LGBT families facing an unfair healthcare burden. We have heard many stories of families lacking complete healthcare coverage due to discrimination. If you would like to share your family's story, please do so at our Wisconsin LGBT Story Collection Project. Speaking out about healthcare injustice is one of the best ways to push Wisconsin to build a bridge across the Fairness Gap—in healthcare and across the board!
In this chapter, we turn our attention to the barriers affecting LGBT couples who actually receive joint benefits. As we have reported, a growing number of enlightened (or economically savvy) employers offer domestic partner benefits in Wisconsin. This is a clear trend, and every new employer who decides to offer these benefits takes us a step in the right direction. However, an LGBT employee who secures healthcare coverage for a partner under his or her work plan still faces discrimination. As a result of the Fairness Gap, these LGBT couples pay more income taxes and have reduced enrollment options compared with their straight counterparts.
Income taxes on partner benefits
When an employer pays for healthcare benefits for an employee's spouse, that payment is not considered taxable income to the employee. But when an employer provides healthcare benefits to an LGBT employee's partner, the amount of that benefit is considered taxable income. Even though the income is never paid to the employee in dollars and cents, it is "imputed" to the employee, meaning it is considered to be the employee's income and is recorded as imputed income (see definition on right) on the employee's paycheck and reported as income on the employee's W-2 at the end of the year. So even though the employee never actually receives the income, he or she must pay income taxes on it. Married couples do not have to recognize this form of "phantom" income, and so they do not have to pay taxes on it.
This is one more example of the unfair tax discrimination LGBT couples face. As it is, LGBT couples usually pay higher household tax rates because they cannot file joint income tax returns. But the LGBT employee who obtains family healthcare through work faces more than a higher tax rate. Instead, he or she is forced to recognize a portion of the health care benefit itself as "income" – and pay taxes on it – when the exact same benefit is income-tax free for a married person!
Take a look at this HRC article for more information on how taxation of domestic partner benefits burdens LGBT couples and families.
Lack of special enrollment
In addition, insurers that offer group health benefit plans are required to allow a special enrollment (see definition on right) window for recently married employees to add their spouses onto their health plans, pursuant to Section 632.746(7)(a) of the Wisconsin Statutes. If this special enrollment window were unavailable, a newly married spouse could potentially lack insurance for any number of months (or nearly a year!) until the next open enrollment (see definition on right) window came around. Therefore, the statutory requirement to allow for immediate coverage for the new spouse amounts to a significant advantage for married couples.
For LGBT couples, there is no statutory requirement of a special enrollment window. Even when group health benefits extend coverage to domestic partners, a Fairness Gap remains for LGBT couples that restricts their health care benefits.
Conclusion
Because inequality is imbedded in so many laws and policies, LGBT citizens often end up with the short end of the stick. While always better to have health care coverage, LGBT families face discrimination even when enlightened employers take steps to bridge the Fairness Gap. Just another example of why inequality is wrong, and why Fair Wisconsin is committed to both highlighting these areas of the Fairness Gap and reversing them.
