Brokerage Ops

Employee Shades of Gray

Fictitious Marriages, Domestic Partners and Civil Unions
By Russ Banham Posted on October 28, 2014

This, of course, is not always the case. The same revelations also apply regarding employees in domestic partnerships and civil unions.

For gay employees, when the truth comes out, it can be financially painful.

“What often happens is the employee experiences some life event, like a serious illness involving the spouse, and the employer now asks for documentation like the marriage certificate,” says Patrick Haynes Jr., ERISA general counsel and director of compliance at employee benefits consulting firm Crawford Advisors. “Suddenly, the company realizes there is no marriage certificate from the state because the state prohibits same-gender marriage. It now faces penalties and fines for improper tax withholding.”

The penalties for improper tax withholding on a state-by-state basis can be as much as 20%, sometimes more, according to Lisa Nelson, director of compliance and regulatory affairs at Barney & Barney in New York. Employers often “trust their employees’ assertions” when they claim to be in heterosexual marriages or other forms of legally recognized relationships, she says.

Other benefits specialists agree. “Employers want to ensure legitimacy, but they often accept what employees say without reservation,” says Wade Symons, practice leader at Mercer Regulatory Resource Group, which is part of benefits advisor Mercer. “We’ve seen situations where an employer permits domestic partnerships to receive full benefits only to learn that the ‘partner’ was really an uninsured neighbor with cancer.”

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