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When it comes to retirement security, LGBT Americans still have a long way to go. The federal Defense of Marriage Act (DOMA) is a core obstacle to equality for a range of important benefits and legal protections, because it defines the word "spouse" as applying only to different-sex married couples for any purpose involving interpretation of federal law.
The ground is shifting quickly, though. Legal challenges related to DOMA and same-sex marriage are making their way toward the Supreme Court. And the workplace is changing quickly as companies reshape their benefit programs to ensure equality.
But LGBT individuals and couples also can take action on their own to improve their retirement security.
Here's a checklist of five key areas LGBT Americans should be sure to address....
Until 2010, it wasn't possible for a workplace retirement saver to name a non-spouse beneficiary. That changed starting in 2010 due to provisions of the Pension Protection Act of 2006. Non-spouse beneficiaries, including employees' partners, are permitted to roll their inherited retirement benefits directly to an individual retirement account or an annuity.
Gay workers who started with their employers before 2010 should re-visit their beneficiary designations. But they also should check to make sure their employers are complying with the new law. Only 86 percent of corporations that have rollover provisions have made the adjustments needed to extend benefits to same-sex partners, according to the 2012 Corporate Equality Index, an annual survey of corporations by the Human Rights Campaign Foundation (HRC), a non-profit research, education and advocacy group.
"For many companies, this is an administrative fix that just hasn't been on the radar screens of human resources departments," says Deena Fidas, deputy director of corporate programs for HRC.
PENSION SURVIVOR BENEFITS
Social Security's valuable spousal and survivor benefits aren't extended to LGBT couples, and won't be unless DOMA is repealed. But gay workers lucky enough to have a defined benefit pension may be able to extend lifetime annuity-style income to a spouse through a pension survivor option.
Under federal law, companies sponsoring traditional defined benefit pension plans must offer workers a survivor option, which allow spouses 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.
The HRC study found that 73 percent of corporations now offer a survivor option for domestic partners of workers who die after retirement. What if you work for a company in the other 27 percent? One option is purchasing a life insurance policy covering the pension owner. "You pay for the insurance, but at least you wind up with something," says Kyle Young, vice president and investment officer for Wells Fargo Advisors, who specializes in serving LGBT individuals and couples as clients.
RETIREE HEALTH INSURANCE
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 can enroll without paying a premium if a spouse qualifies. But DOMA means that a legally married LGBT same-sex 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 $451 for those with less than 30 quarters in the system.
Health insurance for retirees from former employers is on the decline, but 44 percent of companies that provide health insurance to retirees extend the coverage to domestic partners.
Under federal law, heterosexual couples can bequeath unlimited sums to surviving spouses. But same-sex couples are subject to the confiscatory 55 percent federal estate tax on inheritances over $5 million - a ceiling that is scheduled to drop to $1 million in 2013.
One solution is a life insurance policy that provides a benefit large enough to fund the federal estate tax. Another is to start a gifting program that slowly shifts assets over a period of years from one same-sex spouse to another; federal law permits tax-free gifts up to $13,000 annually.
"This works well if you have a couple where one has substantially larger assets than the other," says Kyle Young, vice president and investment officer for Wells Fargo Advisors, who specializes in serving LGBT individuals and couples as clients. "It can take many years, but it doesn't cost anything to do. The idea is to get to the point where both pass away with estate tax exemptions under $1 million."
Having a will is essential. In most states, if a person dies without a will, inheritance rights default to a spouse - but that rarely applies to same sex couples.
Most seniors who become incapacitated rely on family members for assistance with caregiving. But LGBT individuals are less likely to have access to family assistance. They are twice as likely to be single and up to four times more likely to be without children than their heterosexual counterparts, according to the AARP Public Policy Institute.
"Gay seniors often are relying on what would be considered informal caregivers who aren't legally related," says Hilary Meyer, director of the National Resource Center on LGBT Aging for SAGE (Services and Advocacy for GLBT Elders). That means it's important to consider giving power of attorney to a potential caregiver in case of incapacitation, and a durable power of attorney for financial affairs.
Some seniors purchase commercial long-term care policies, but most seniors who need long-term care rely on Medicaid - which is the largest insurer of nursing home care.
The same sex spousal rules here can be tricky. Medicaid is a joint federal and state program, and its rules vary from state to state, but most pay for care only for seniors with very few assets. The federal qualification rules include "spousal impoverishment protections" aimed at preventing a healthy spouse from having to give up a home or retirement savings in order to qualify a spouse for coverage.
Those rules don't generally apply to same sex couples, although some states are extending the protections. SAGE publishes a guide to Medicaid long-term care rules (link.reuters.com/qus88s).
"It's important to know the rules in the state where you live," Meyer says. "And they're always in flux."