From the September 2004 issue of Entrepreneur

Providing benefits to same-sex couples is on CEOs' radar: A study by the Washington, DC-based Human Rights Campaign found there was an 18 percent increase last year in private employers, colleges and universities offering domestic partnership benefits. Forty percent of Fortune 500 companies now offer them. Employers are responding to the marketplace, says Kim Mills, education director of the Human Rights Campaign and co-author of the study. "A lot of employers are seeing that American families are not Ozzie, Harriet and the boys anymore."

Nearly 4 million unmarried same-sex couples lived together in 2000, according to the U.S. Census Bureau. But couples can't access their partners' COBRA, 401(k) and Social Security survivor benefits. And they pay additional federal income tax on the benefits they do receive. "It's unfair," says Justin Nelson, co-founder of the National Gay & Lesbian Chamber of Commerce, a Washington, DC, grass-roots advocacy group.

Massachusetts has legalized gay marriage, and a handful of states including California, Hawaii, New Jersey and Vermont are progressive toward domestic partnership benefits. But 38 states have enacted Defense of Marriage Acts (DOMAs) that define marriage as a union between a man and a woman. And amid the controversy, a Constitutional amendment banning gay marriage died in the Senate in July. Gay marriage is likely to be a wedge issue in an election year.

Conflicting state laws create conflict for employers. What are companies obligated to provide if a gay employee marries in Massachusetts but lives in a state with a DOMA? Right now, "they're not married anywhere but Massachusetts," says Phyllis Bossin, Cincinnati chair of the American Bar Association Family Law Section. Offering benefits is up to employers.

Cost is a huge factor for companies. The Corporate Resource Council, which opposes gay marriage, estimates employers might pay up to 5 percent more annually if 1 to 2 percent of employees access domestic partner benefits. Mills disputes this figure, saying costs typically increase about 1 percent annually for employers offering domestic partnership benefits.

The VIA Group, a marketing and communications firm in Portland, Maine, with offices in Boston and New York, has offered same-sex benefits for six years. The company pays $10,500 annually in domestic partnership premiums, and 3 percent of its employees buy insurance coverage for a domestic partner.

The tricky part is navigating differing definitions of domestic partnerships in three states. "There are criteria regulated by the state, in concert with the [insurance] carrier. We find out what we can legally do and set up a system," says The VIA Group founding partner Rich Rico, 44. Employers may incur additional costs, he says, but will profit through better recruiting and retention. It hasn't hurt the company's bottom line, either: Sales hit more than $15 million last year.