Health-benefits tax bill draws adviser interest

CHICAGO — A bill that would extend to domes- tic partners the preferred tax treatment enjoyed by married couples in employer-sponsored health-care plans is attracting attention from financial advisers. Introduced in the House before the Easter recess by Rep. Jim McDermott, D-Wash., who said he is trying to “correct workplace injustice,” the measure doesn’t define domestic partners or mandate that employers offer health benefits to non-married couples. Under current law, employer-paid health insurance premium contributions for an employee’s spouse are excluded from the employee’s taxable income. Employer contributions for a domestic partner’s coverage, however, are considered wages. As a result, they are treated as taxable income. “This glaring inequity can add thousands of dollars to an employee’s taxable income every year and result in higher federal income taxes, when the only difference is that one household includes a married couple and another includes a domestic partnership. That’s absolutely wrong,” Mr. McDermott said in a statement. The bill specifically doesn’t define a domestic partnership, said Lara Schwartz, legal director of The Human Rights Campaign, a Washington-based education and lobbying organization. Her group supports the bill and thinks that the term “domestic partnership” should be defined by each company that offers health benefits. Companies define domestic partnerships in many ways, Ms. Schwartz said. Some include same-sex couples, while others limit the term to male-female couples who aren’t married, she said. “This bill is not an employer mandate. It doesn’t tell employers how to offer health benefits to domestic partners,” Ms. Schwartz said. “I think that’s one reason there’s strong support,” she added. “It trusts the employers who have been doing this and doing it very well, and doesn’t force them to change things that have been very successful.” Many companies already offer benefits to non-married couples, said Milo M. Benningfield, a certified financial planner with Benningfield Financial Advisors of San Francisco. “When the definition is domestic partners, we’re not just talking about same-sex partners,” he said. “A lot of people reaping the benefits are elderly [opposite sex] couples who don’t want to get married for estate purposes.” Mr. Benningfield said that workers can spend up to 25% of their pay on health insurance, which ends up being a hefty expense. “I think this really hits home. If we’re partners, why should [a tax break] depend on our married status?” Mr. Benningfield said. “All of this health-care stuff is an issue because we don’t have universal health care,” he said. Congress should ensure universal access to health care, rather than focus on tax breaks for people who already are covered, said Jeffrey E. Daniher, a CFP with Ritter Daniher Financial Advisory LLC in Cincinnati. He said that many of his clients are single-female heads of household who have difficulty obtaining health insurance. “I wouldn’t say I’m against this bill,” Mr. Daniher said. “But I’m in favor of something else.”