Major Benefit Plan Changes May Result from the New Human Rights Campaign Foundation’s Corporate Equality Index

Todd Solomon
May 11, 2010 — 2,466 views  
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Employers that are rated on the annual Human Rights Campaign Foundation’s Corporate Equality Index should take note of important changes being made to the evaluation criteria beginning with the 2012 Index.

The Human Rights Campaign Foundation (“HRC”) is the nation’s largest lesbian, gay, bisexual and transgender (“LGBT”) civil rights organization.  The Index is a nationally-recognized raking of large employers throughout the United States on issues involving workplace equality for lesbian, gay, bisexual and transgender (“LGBT”) individuals.  The annual Index evaluates employers on a series of criteria that demonstrate the employer’s commitment to equal treatment of all people regardless of their sexual orientation and gender identity or expression.  Employers generally are ranked on the Index based on a survey that the employer submits to the HRC.  In 2010, 305 of the 590 employers evaluated received a perfect 100 percent ranking on the Index.

The HRC has updated the criteria on which employers are evaluated several times since the Index was first introduced in 2002 in order to continue raising the bar on the comprehensive benefits and inclusive employment practices and policies that employers must implement in order to ensure that LGBT individuals are treated equally.  The new criteria for the 2012 Index will stress comprehensive employee benefits for same-sex spouses and partners, transgender-inclusive medical and short-term disability benefits, organizational competency on LGBT issues and public engagement with the LGBT community.

Employers may need to take action soon to begin preparing for the new criteria for the 2012 Index.  Surveys for the 2012 Index will be distributed to employers in March 2011.  Employers must demonstrate that all new criteria other than those impacting employee benefits will be in place by July 29, 2011.  All changes to an employer’s benefit plans must be effective no later than January 1, 2012.  In addition, HRC requires employers to announce to employees any changes that will be made to the employer’s benefit plans to satisfy the criteria for the Index prior to the publication of the 2012 Index on September 1, 2011.

Parity in Employee Benefits

To score highly on the Index under the criteria previously in place, employers had to offer same-sex partners of employees and their legal dependents medical, dental and vision insurance coverage as well as COBRA-equivalent continuation coverage.  In addition, employers had to offer at least three of the following benefits to employees’ same-sex partners:  FMLA-equivalent leave, bereavement leave, employer-provided supplemental life insurance, relocation/travel assistance, adoption assistance, qualified joint and survivor annuities, qualified pre-retirement survivor annuities, retiree healthcare benefits or employee discounts.

The new criteria will require parity in all benefits extended to employees’ opposite-sex spouses to ensure that these same benefits are extended to employees’ same-sex partners under the same terms to the extent permitted by law.  These benefits include including retirement benefits, medical and dependent coverage, COBRA-equivalent coverage, FMLA-equivalent leave and any fringe benefits.  Same-sex partners will include all state-registered domestic partners, civil union partners and same-sex spouses.

This change will impact a number of different types of plans.  In particular, employers with qualified defined contribution retirement plans will need to review their plans to ensure that same-sex partners are the default beneficiary of participants who die without naming a beneficiary and are included in hardship distribution provisions.  In order to receive a perfect score on the Index, plans must be amended to include an employee’s same-sex spouse or partner as a default beneficiary.  In addition, many defined contribution plans permit employees to take a hardship distribution from their plan accounts under certain specified circumstances.  Plans that offer such hardship distributions must be amended to take same-sex spouses and partners into consideration to the same degree as an employee’s opposite-sex spouse in determining the employee’s eligibility for the distribution.  This change is legally optional under the Pension Protection Act of 2006, but will now be required in order to retain a perfect score on the Index.

Employers’ defined benefit pension plans will also need to be amended in order to extend qualified joint and pre-retirement survivor annuities to same-sex spouses and partners.  Pension plans are required to permit an employee’s benefit to be paid over the span of the employee’s life or the joint lives of the employee and his or her opposite-sex spouse.  Plans must be amended to offer a joint annuity that is payable over the lives of an employee and his or her same-sex spouse or partner.  In addition, pension plans are required to offer a qualified pre-retirement survivor annuity that is payable to an employee’s spouse in the event that the employee dies before beginning payment of his or her pension benefits.  Plans offering pre-retirement survivor annuities will need to be amended to include same-sex partners and spouses as recipient survivors of such annuities.  Employers implementing these changes for the defined benefit pension plans may want to consider whether  the added administrative complexity of tracking an employee’s same-sex spouse or partner warrants extending joint and pre-retirement survivor annuities to any non-spouse beneficiary designated by the employee.  While many employers have opted to implement non-spouse beneficiary annuities, doing so is more expensive than extending such annuities only to same-sex spouses and partners.

Employers that offer any insured medical, dental, vision and other welfare benefits to employees will need to review the contracts with their insurance providers in order to ensure that same-sex spouses are included in the definition of “spouse” under the contract in those states where same-sex marriage is legal or recognized.  Same-sex marriage is currently legal in Connecticut, Iowa, Massachusetts, New Hampshire, Vermont and the District of Columbia.  New York will also recognize same-sex marriages formed in any of these jurisdictions even though same-sex couples cannot legally marry in New York.  California recognizes same-sex marriages performed in the state between June 16 and November 4, 2008, as well as all out-of-state same-sex marriages performed before November 4, 2008.

In administering their benefits, employers must also now ensure that the same “proof” is required of a same-sex couple’s relationship as is required for an opposite-sex couple’s relationship.  This means if an employer requires a same-sex couple to provide a copy of their marriage certificate in order to be eligible for benefit, the employer must also require opposite-sex couples to provide the same documentation.

Health Benefits for Transgender Employees and Dependents

In order to obtain a perfect score on the Index, Employer-sponsored medical and short-term disability benefits must now include comprehensive coverage of transgender-specific treatments.  Employers previously were able to achieve high ranking on the Index by offering benefits covering one of the following categories of treatment for transitioning transgender individuals:  counseling by a mental health professional, pharmacy benefits covering hormone therapy, medical visits to monitor the effects of hormone therapy and other associated lab procedures, medically necessary surgical procedures such as hysterectomy, or short term disability leave for surgical procedures.

Many employers’ medical and short-term disability benefit plans currently exclude transgender-specific treatments by classifying them as “cosmetic.”  The new criteria will require employers to work with their insurance carriers and administrators to remove such exclusions and affirmatively extend coverage to any medically necessary treatments and procedures.  Guidance on the transgender-specific treatments and procedures that should be covered because they are medically necessary is available under the standards of care defined by the World Professional Association for Transgender Health (“WPATH”).  To complete the survey for the 2012 Index, employers will be required to submit documentation to verify that medical and short-term disability benefits will in fact provide coverage for transgender-specific treatments beginning no later than January 1, 2012.

Organizational Competency of LGBT Issues and Public Commitment to the LGBT Community

In order to obtain a perfect score on the Index, employers must demonstrate a “firm-wide sustained and accountable commitment to diversity and cultural competency” through at least two of the following:

- Training for new employees that informs them of the employer’s non-discrimination policy which includes gender identity and sexual orientation and provides them with definitions or scenarios illustrating how the policy applies to each
- Training for supervisors that includes gender identity and sexual orientation as discrete topics and provides definitions or scenarios illustrating how the policy applies to each
- Integration of gender identity and sexual orientation in professional development, skills-based or other leadership training that includes elements of diversity and/or cultural competency
- Development of gender transition guidelines with supportive restroom, dress code and documentation guidance
- Implementation of senior management and executive performance measures that include LGBT diversity metrics

Employers must also demonstrate an “ongoing LGBT-specific engagement that extends across the firm” through at least three of the following:

- Demonstrated efforts to reach LGBT applicants and recruit LGBT employees
- Supplier diversity program with demonstrated effort to include certified LGBT suppliers
- Marketing or advertising to LGBT consumers (e.g. advertising with LGBT content, advertising in LGBT media or sponsoring LGBT organizations and events)
- Philanthropic support of at least one LGBT organization (e.g. financial, in kind or pro bono support)
- Demonstrated public support for LGBT equality under the law through local, state or federal legislation or initiatives

The HRC recently distributed surveys for the 2011 Index to employers.  Although the 2011 Index will be evaluated based on the existing criteria, the HRC has provided employers previously included in the Index with a preliminary score under the 2012 criteria in order to help employers prepare for the transition to the new criteria.  Because implementing changes to an employer’s employee benefit plans can often be complex, employers should take action now to review their benefit plans and identify the changes that may be necessary for the 2012 Index. 

Todd A. Solomon is a partner in the Employee Benefits Department of McDermott Will & Emery’s Chicago office. He is the author of the third, fourth and fifth editions of Domestic Partner Benefits: An Employer’s Guide, and was the co-author of the book’s first and second editions.

Brian J. Tiemann is a member of the Employee Benefits Department in the Chicago office of McDermott Will & Emery.

Todd Solomon


Todd A. Solomon is a partner in the law firm of McDermott Will & Emery LLP based in the Firmís Chicago office. As a member of the Employee Benefits Department, Toddís practice is concentrated primarily on designing, amending, and administering pension plans, profit sharing plans, 401(k) plans, employee stock ownership plans, 403(b) plans, and nonqualified deferred compensation arrangements. He also counsels privately and publicly-held corporations and tax-exempt entities regarding fiduciary issues under ERISA, employee benefits issues involved in corporate transactions, executive compensation matters, and the implementation of benefit programs for domestic partners of employees. A portion of his practice consists of advising clients on fiduciary and plan investment matters. Todd has experience counseling plan fiduciaries with respect to investment policies, alternative investments (e.g., hedge funds, limited partnerships, real estate), prohibited transaction issues, investment management agreements, and payment of expenses from plan assets.