DEAR CARRIE: My daughter turns 26 this year and will age out of my health insurance. Meanwhile, she has been living with her boyfriend for a year and a half. He asked his employer, a large New York City financial firm, whether she could get benefits through his company as his domestic partner. He said the request was denied because they are a heterosexual couple. How is this legal in New York, which recognizes gay marriage? I am all for gay rights, but this seems a little unfair.
— Uneven Coverage
DEAR UNEVEN: The “unfairness” you hint at may be the unintended consequence of changing laws and companies’ policy changes to try to catch up with the laws, said an employment attorney.
“The only reason why the reader’s employer seems unfair today is that it did its best to avoid an unfairness that existed just a few years ago,” said Richard Kass, a partner at Bond, Schoeneck & King in Manhattan.
Here’s some background: Traditionally, health-insurance benefits were available only to spouses of married employees, Kass said. But that discriminated against gay employees, who could not get married.
To avoid this discrimination, many employers started offering benefits to same-sex domestic partners.
“It made sense to exclude opposite-sex domestic partners, since opposite-sex couples had the option to qualify for benefits by getting married,” he said.
Now that same-sex marriage is legal both in New York and nationwide, the rationale for excluding heterosexual couples from domestic partner benefits no longer makes sense, he said. That’s because “a benefit that was set up to avoid discrimination against gays now discriminates against straights.”
To avoid claims of sexual-orientation discrimination, employers can now switch back to the old way of doing things and restrict benefits to married couples only, he said.
“Now that marriage no longer discriminates on the basis of sexual orientation, neither does a policy that is tied to marriage,” he said. “Alternatively, employers can offer benefits to unmarried domestic partners of any sexual orientation.”
Since same-sex marriage is relatively new, a court would probably permit an employer to transition to a nondiscriminatory system by retaining a policy of domestic-partner benefits for same-sex couples only, but only for a limited period of time to permit the same-sex couples to get married.
“The reader’s employer probably does not intend to be unfair,” he said. “It has just been a little slow changing its HR policies to keep up with changing times.”
DEAR CARRIE: In working on my daughter’s taxes, I came across a question about how to report income that was reported on a 1099 Miscellaneous form for a summer internship. She was lucky enough to be selected for a 10-week mentoring program sponsored by a federal agency. She received a stipend of $500 a week for the 10-week summer program. The lab reported her $5,000 total as non-employee compensation on a 1099 Miscellaneous form. But that option is costly because it considers the money as income related to a self-employment/independent contractor status, requiring her to pay a self-employment tax. I would prefer to go with miscellaneous “other income.” What should I do?
— Which Income?
DEAR WHICH: Your question came too late to appear before tax day, but hopefully the information will come in handy for late filers or for next year’s taxes.
It doesn’t seem like the non-employment compensation option, or Box 7, on the 1099 Misc is the best option because your daughter would indeed have to pay a self-employment tax, an IRS spokeswoman said. The better choice is Box 3 on the form, or “the other income” option.
FOR MORE INFORMATION
Go to bit.ly/liTAXES for more on the miscellaneous-income options.