Yale unlikely to pay taxes for same-sex couples

After a Yale accounting error hit employees who rely on domestic benefits for same-sex couples, LGBT activists are calling on the University to level the playing field.

Yale failed to withhold income used to cover the federal tax on domestic partner health coverage for same-sex couples from approximately 60 employees in 2010. Now, the University is making up the difference by subtracting the funds from those employees’ 2011 salaries. Administrators say Yale has no plans to retroactively pay the taxes owed by employees — a decision that has sparked anger among workers — and no plans to introduce a pay raise to offset the value of the tax during a period of increased financial cutbacks.

It remains unclear why the affected workers did not realize their paychecks were consistently greater than normal in 2010. University workers enjoyed a “Benefits Holiday” in December 2009, when Yale suspended benefits deductions for the month. One University employee, who spoke anonymously to protect her professional relationship with Yale, said her income that month was higher than usual because of the holiday. She said she subsequently saw no significant jump in pay between December 2009 and January 2010.

The employee added that paycheck stubs were only issued on paper until fall 2010, when the University transitioned to an electronic format. The paper copies, she said, were “cryptic” to read.

In the wake of Yale’s payroll error, the Human Rights Campaign, the nation’s largest civil rights group that advocates for LGBT equality, has called for the University to amend its repayment plan for employees, absorb the cost of the mistake, and cover the domestic benefits tax in future years.

A small number of companies nationwide — including Facebook, Google, and the Bill & Melinda Gates Foundation — have taken a stand against a federal policy that taxes health benefits for same-sex couples regardless of their legal marriage status in Connecticut and other states. These companies offset the value of the domestic benefits tax through a process known as “grossing up,” or increasing salaries so that employees can pay the extra tax without reducing their income.

Yale is not among these organizations, and few universities have instituted such a policy. Syracuse University became the first higher educational institution to begin “grossing up” salaries for same-sex employee couples in March 2010.

“Because other companies are doing it I feel that [Yale] could very well follow suit and perhaps become a forerunner in terms of educational institutions starting the practice,” said Carolyn Caizzi, who works in the Haas Family Arts Library and was one of the employees affected by the accounting mistake. “Because this error happened in the payroll, I feel like it’s a prime opportunity for [Yale] to seize the moment and basically just right a wrong.”

Ninety-nine percent of organizations across the private and public sectors do not “gross up” pay for employees in same-sex couples, and most do not provide domestic partner health coverage, Vice President for Human Resources and Administration Michael Peel said in an e-mail Wednesday.

“Yale has benefit coverages for LGBTQ employees that are among the most progressive in the nation,” Peel said. “We review our benefits periodically, but we have no current plans to pay the federal taxes owed by employees for the benefits provided.”

Provost Peter Salovey said Yale’s $68 million budget deficit would make it difficult for the University to cover its employees’ domestic benefit taxes. To balance the budget for the 2011–’12 academic year, both academic and non-academic units will be asked to make further cuts, Salovey and University President Richard Levin told faculty and staff earlier this month.

In light of Yale’s financial concerns, Salovey said the University’s best course of action would be to speak out about the federal tax policy.

“I think the most effective approach Yale can take is to act consistently with the law while speaking out about its unfairness and the need for change,” he said.

According to the HRC, 11 for-profit employers have implemented a “grossing up” policy as of January.

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