Fed benefits gap draws LGBT ire

February 10, 2011

Herb Burtis and John Ferris met while both were undergraduate music students at Michigan State University in 1948. Burtis was 18, and Ferris was a 22-year-old veteran of the U.S. Army. They studied with the same organ teacher and connected initially through their mutual love of music

Herb Burtis (left) and John FerrisBurtis and Ferris committed to one another and ultimately spending 60 years together. They were married in 2004, after Massachusetts became the first state in the country to legalize same-sex marriage.

“I told him I was only marrying him for his benefits,” Burtis recalls with a laugh. At the time, he was just kidding about the benefits– but it turned out to be no laughing matter.

Ferris was diagnosed with Parkinson’s disease in 1992, and he died of the slow-moving disease in August, 2008. Both Herb and John enjoyed careers as accomplished musicians and teachers, but John had the better-paying job, working for 32 years as university organist and choirmaster at Harvard University. Herb held similar posts at a church in New Jersey, performed internationally and worked independently as a voice teacher. The two owned a home together in western Massachusetts.

Many employment benefits are geared to employee earnings history. But married couples often can take advantage of policies that allow lesser-earning spouses to tap the benefits of the higher-earning partner. That option often isn’t available to LGBT couples – including those who reside in one of the five states (and District of Columbia) that currently have legalized marriage for same sex couples. That’s because the Defense of Marriage Act (DOMA) of 1996 defines the word “spouse” as applying only to different-sex married couples for any purpose involving interpretation of federal law.

DOMA blocks Burtis’ access to one of the most important features in the Social Security program – the survivor benefit. Under Social Security’s rules, when a spouse dies, the survivor is entitled to receive the greater of his or her own benefit, or 100 percent of the spouse’s benefit – including any cost-of-living increases the spouse has received along the way. In Burtis’ case, that means foregoing about $700 in monthly benefits.

Burtis is one of a group of Massachusetts residents who are plaintiffs in a lawsuit challenging the constitutionality of DOMA. Gill et al. v. Office of Personnel Management argues that the federal government’s exclusion of legally-married same sex couples is a violation of the Constitution’s equal protection clause. The plaintiffs are seven married couples and three widowers affected by federal marriage discrimination. A federal court judge ruled in the plaintiffs’ favor last summer, and the case is on appeal.

The case was filed by Gay & Lesbian Advocates & Defenders (GLAD), a New England-based legal advocacy organization; the organization has filed a similar suit on behalf of legally-married same sex couples in Connecticut.

DOMA impacts a range of key financial issues for same sex couples beyond retirement benefits, including health insurance, income taxes and tax treatment of estates. Tara Siegel Bernard and Ron Lieber of The New York Times estimated the cost of being a gay couple in 2009 by comparing two hypothetical couples with two children – one straight and one gay. They calculated that the extra expense could vary widely, depending mainly on the quality of health benefits – but that the tab could run as high as $467,562.

But the retirement issues generate some of the most striking and large dollar amounts. Consider:

Social Security: Burtis was advised to apply for John’s Social Security benefits by his stockbroker, but when he went to the local Social Security office in western Massachusetts, he was turned down. “I wanted to apply anyway to be on the record in case the law changes, and eventually talked by phone with the office manager. He told me that when he tried to enter my request into their computer it kept kicking it back because the gender entry was male-male.”

If Burtis lives to 90, the lost increase in lifetime Social Security benefits from the time of John’s death would exceed $100,000.

Medicare: Eligibility for Medicare is based on the number of quarters in which you have paid payroll taxes into the system. At age 65, anyone with a work history of at least 40 quarters can enroll for Medicare Part A (hospitalization) without paying a premium. Everyone pays a premium for Part B (doctors’ visits), Part D (prescription drugs) or a supplemental Medical policy. But access to the entire program is predicated on Part A enrollment.

You also can enroll without paying a premium if a spouse qualifies. “Marriage is the vehicle for accessing the Medicare system,” says Mary Bonauto, GLAD’s civic rights project director and lead attorney on both the Massachusetts and Connecticut cases.

DOMA means that a legally married LGBT spouse lacking those 40 quarters must take the other route into Medicare – buying into the system by paying a hefty Part A premium out of pocket. This year, the monthly Part A premium is $248 for beneficiaries with 30 to 39 quarters of work history, and $450 for those with less than 30 quarters in the system.

What’s the Part A buy-in cost for a LGBT spouse? Consider the case of an enrollee with less than 30 quarters of work history. Assuming that person lives to age 85, lifetime cost would total $108,000 – and that’s before any escalation of the Part A premium beyond the 2011 rate. And it doesn’t include the additional health care expense of premiums for prescription drugs or Medigap. For the average straight couple, the Center for Retirement Research at Boston College estimates that the typical married couple at age 65 can expect to spend $197,000 in lifetime uninsured health costs. LGBT couples can expect to tack on considerable additional expense.

Joint and survivor pensions: The Employee Retirement Income Security Act of 1974 (ERISA) requires that companies sponsoring traditional defined benefit pension plans offer workers the option of a survivor option. This option allows a spouse to continue collecting annuity payments after the primary beneficiary’s death; typically, the employee accepts a lower monthly payment in return for the spousal protection. Although ERISA doesn’t contain a clear definition of what constitutes a spouse, DOMA’s definition governs – and that means same-sex plan participants can’t opt for a survivor benefit unless the plan sponsor has set up something specifically for that purpose.

“There are companies that have created parallel systems to cover same-sex couples but very few,” says Bonauto.

Spousal IRA contribution: Individuals can contribute the smaller of $5,000 or total annual taxable compensation to an IRA annually (the limit is $6,000 after age 50). Married couples filing joint tax return can each contribute $5,000 – but if one spouse has little or no earned income, that person can still make a contribution, so long as the working spouse has enough income to “cover” the contribution.

Bonauto expects a decision in the Massachusetts case by the end of this year, but adds that there’s a strong likelihood the case ultimately could find its way to the U.S. Supreme Court. “Congress has much more information now on how DOMA harms people than it did when it was passed,” she says. “Typically, if a federal law is struck down, the U.S. Government would appeal it to the Supreme Court,” she says. “If we lose, we’ll review the facts at that point and decide how to proceed.

Photo: Herb Burtis (left) and John Ferris in an undated handout. REUTERS/Handout

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