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Bloomberg Tax Management Memorandum: Fertility and Surrogacy Benefits – What Are the Tax and Legal Implications?

Bloomberg Tax Management Memorandum

Cassandra Labbees, Member of the Firm in the Employee Benefits practice and Cynthia Joo, a Summer Associate (not admitted to the practice of law) in the Employment, Labor & Workforce Management Practice, co-authored an article in the Bloomberg Tax Management Memorandum, titled “Fertility and Surrogacy Benefits: What Are the Tax and Legal Implications?”

Following is an excerpt (see below to download the full version in PDF format):

Offering family-friendly employee benefits is a growing trend and sends an important message of inclusivity and support to an increasingly diverse workforce longing to start a family. However, employers looking to extend coverage or reimbursement for certain fertility benefits through a group health plan must consider the various tax and legal implications in providing such benefits.

More employers are now offering fertility and surrogacy benefits as part of their benefits package as more women delay having children to focus on their careers and more single people and same-sex couples opt to have children. This emerging employee benefit comes at a time when infertility rates among married women have also increased significantly in recent years. According to the Centers for Disease Control and Prevention, about 6% of married women aged 15 to 44 years in the United States are unable to get pregnant after one year of trying. About 12% of women aged 15 to 44 years in the United States have difficulty getting pregnant or carrying a pregnancy to term, regardless of marital status. Although parenting children is central to the identity of many Americans, about one in ten intended parents experience infertility. These societal trends are the driving force behind the rise in fertility benefits and pregnancy-related benefits offered by employers across industries.

Medical fertility treatment involves various types of Assisted Reproductive Technologies (ARTs), such as in vitro fertilization (IVF), intracytoplasmic sperm injection (ICSI), egg donation, and surrogacy. Such treatment can be costly and often is not covered by health insurance. In an effort to recruit and maintain top talent, a growing number of companies in the United States have expanded their health benefits to cover some form of fertility benefit for their employees. Intel Corporation, for example, contributes up to $40,000 for employees’ fertility treatments along with another $20,000 for prescription coverage. Couples adopting children are also eligible for up to $15,000 in reimbursement. Parents may take up to eight weeks of paid ‘‘bonding leave,’’ while mothers who have given birth may take an additional 13 weeks of paid leave. The Bank of America Corporation provides unlimited IVF coverage, although the company does require an infertility diagnosis. It also provides 16 weeks of paid leave for parents with newborn or adopted children, with an additional 10 weeks of unpaid leave also available.

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